Thanks for your work on this!

I am not sure whether Hubbert peak applies as much to natural gas. In the US, we have seen more of flat production for many years, followed by a fall off of conventional, and rise of unconventional. It seems like the situation may be more complex, but I agree it doesn't look good.

Regarding NAFTA, I think there was talk earlier in the US election cycle of renegotiating NAFTA, if one of the Democratic candidates win. It seems like there could also be pressure from Canada in this regard. A NAFTA renegotiation would almost certainly come out better for Canada. The change may not be fast though. If Canada is to keep more of its production, it would seem like it would need more west-east pipelines, and this could take several years to build.

Thanks for the very interesting article. I have one question/comment:

You write: "As stated above, Canada’s residential sector is expected to increase its natural gas usage by 0.5% per year. By 2010, this corresponds to a residential NG use of 1.87bcf/d up to 4.97bcf/d by 2030." The increase from 1,87 bcf/d to 4.97 BCF/d will only be reached if the annual growth rate is 5%. With 0.5% annual growth the consumption would go up to 2,07 bcf/d. I would also expect that with large price increases the residential consumption will stagnate or will be shrinking a bit.
However with nothing left for residential consumption because everything is going into US export or tar sand production this does not really make a difference.

Jörn Erbguth

I would be very interested in your opinion as to the potential source for the LNG you mention might be imported into Canada. The world market looks very tight-- it would seem to make more sense for Canada to re-negotiate NAFTA proportionality clause, leaving US high and dry (undoubtedly there would be consequences!) and perhaps slow down bitumen production until other heat sources than gas can be developed.

Several things fairly leap off the page to this reader. The assumptions on energy prices going forward are stunning in their unrealistic absurdity. It looks like the same people who made the future low estimates of energy prices in Gordon Brown's administration provided similar estimates to Canada! Even the fortified island scenario looks too low to be realistic. My second point: Who on earth signed off on providing 60% of NG to us here in the US under NAFTA? What were they thinking? Good deal for the US and a bad deal for Canada. Does this obligate Canada to provide it at ANY price? Why can Canada not start to charge 2X or 5X Henry Hub price at any time? You Canadians need to wake up and start thinking about keeping some of your reserves for Canada or in 50 years or so Canadians will be huddling in the dark and becoming very cold.

If you liked this piece, don't forget the "share this" button! :) The reddit and digg entries will take you all of about five seconds.

You've put the guy who signed the NAFTA agreement in jail, right?

In addition to LNG coming from Trinidad & Tobago, a deal was recently signed with Gazprom to build an LNG terminal in Levis, Quebec --to be supplied with NG from Russia starting in 2014 --a prospect that hardly feels secure, given the increasing tightness of Russia's own NG supply.

It is my opinion that severe as peak oil will be, it will be overwhelmed by the larger, looming catastrophe of peak natural gas. I am just a numerically literate outsider looking at the numbers and I just don't see how North America's electrical grid, home heating can pull through this one. South America's NG situation looks iffy too.

Further down the road, natural gas's connection to the fertilizer sector (where prices have gone up several hundred percent in a year) will probably put a choke on feed grain production too. But it looks like the US and Canada are going to go through a baptism of fire with respect to NG before the rest of the world does.

Some may wish to consider relocating to zones where neither much heating nor air conditioning is required.

The Canadians who allowed the 60% NG clause in NAFTA are traitors but then so are the politicians who allow Americans to be put out of work by cheap imports, who squandered a bounty of oil on SUVs, etc.

Once apon a time in Alberta the provincial government required that a 10+ yr supply of gas was put aside for Alberta homes at a regulated rates. Now under NAFTA and the "Alberta Advantage" we get gouged like everybody else. As reported on TOD a couple of days ago even though we use very little gas during the summer our gas bills will double to $90+. There is poor planning even in the land of export gas. I cringe to think what happens here when conventional gas no longer meets our internal needs

Good analysis.

As other commenters have noted, the Henry Hub price projections are very wishful thinking. Today's price exceeded $12 USD per mmBTU.

I share the worries about becoming dependent on LNG for electricity fuel, especially from Russia. Here in California, we get a major share of our natural gas from Alberta (23% in 2006) but "our" only LNG terminal is across the border in Mexico. Initially, the source will be Indonesia but the stage two expansion underway will receive LNG from Siberia and Gazprom.

Back in the 1950s, the original thinkers about nuclear power argued that a major justification for nukes was to preserve hydrocarbons for petrochemical use. Burning methane was a huge waste when uranium was a substitute. Reading about the fertilizer shortages makes me think they were Cassandra-like in their thinking.

Maybe I'm missing something, but I think it is the other way around. I hear lots about the western sedimentary basin or WSB, which magically stops at the provincial borders of BC and Alberta, and also about the Mackenzie delta and basin. Same with coal which also stops and then reappears in Alaska. Given that there were working wells at Norman Wells halfway between during WW2, I'm going to guess that the geology is pretty continuous from west Texas all the way to the North Slope. Some pinhead drawing lines on a map in Ottawa a century ago has nothing to do with geological reality.

Without a pipeline, gas is stranded. Without a sizeable deposit worthy of a pipeline and/or a hefty price, or a looming supply shortfall, natgas just sits there. I'm all in favor of conservation, but I'm not about to take the whole 'issue' seriously without a good analysis of the prospects in the NWT and Yukon areas given that a pipeline down from Prudhoe Bay along the foothills is inevitable. Expensive, but inevitable. Exxon seems to be hoping for a subsidy - surprise! - to make it financially viable. BAU.

Until they hit the ocean, I'm just watching the game as it unfolds.

So let me see if I get this. 60% of Canadian gas production has to go to the US because of the proportionality clause. But figure 3 above suggests that within a couple of decades the remaining 40% will be burned in order to extract oil from the tar sands, and that oil is itself mainly exported to the US. So effectively almost all of the gas ends up in the US.

I suppose it is too much to hope that the NAFTA agreement would consider gas burned to produce oil for export to the US as part of that 60% commitment?

Invest in insulation...lots of it. I have been working on my house and cut my bills in half. I hope to cut them in half again

Adding proper venting in the attic is very cheap and can do wonders to keep a house cool.

The direction I am moving is retrofitting towards a Passivehouse:

" ultra-low energy buildings that require little energy for space heating or cooling"

http://en.wikipedia.org/wiki/Passive_house

Superinsulation is the key...R60!

Some parts of my house are already R85.

I have built flat-plate solar collectors to heat the swimming pool. Once the design and materials have been further refined, more will be added and they will heat the house for all but the coldest winter days.

While we are concerned about the amount of natural gas being used by oil sands production, don't forget that the technology in oil sands is changing.

The Long Lake JV between Opti and Nexen is using the asphaltenes proportion of each barrel of bitumen extracted (about 15%) to generate steam, electricity and hydrogen for their bitumen recovery and synthetic crude oil production system.

This will change the game if/when picked up by others. As the price of natural gas rises, the uptake of this proprietory technology will probably grow.

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Generally good work but doesn't consider possible Gas substitution alternatives enough so leads to conclusion: "Gas is used to produce oil, gas is running low, we're stuffed". (Sounds familiar to the food argument for fertilizer...)

The Hyperion Nuclear battery can generate 70MW of thermal and could be mass produced and deployed rapidly if gas prices rise. 50% Uranium conversion to thermal energy for 10 years in a unit not much more than 2 metres cubed...

http://nextbigfuture.com/2007/11/nuclear-battery-can-be-used-to-help.html

"...They have many good features Hyperion also offers a 70% reduction in operating costs (based on costs for field-generation of steam in oil-shale recovery operations), from $11 per million BTU for natural gas to $3 per million BTU for Hyperion. The possibility of mass production, operation and standardization of design, allows for significant savings..."

IMO the biggest limit to Tar Sands/Shale production is going to be water (and possibly environmental issues if we still care by then...)

Nick.

NAFTA requires that Canada continue to export about 60% of its gas production to the US

False.

Go read it for yourself. In particular, Article 315 and Article 603, and the referenced GATT Article XI and Article XX.

All NAFTA says is that the Government of Canada is not allowed to impose measures like export duties or quotas if such duties would reduce the proportion exported - the two markets need to be treated equally by government policy, even in the event of a shortage. If the result is that Canada exports 60%, or 40%, or 0% of its natural gas production, that's perfectly fine - the US is not "entitled" to any portion of it.

Claiming that Canada will be forced to export 60% of its natural gas production is nothing more than uninformed scare-mongering. All NAFTA means is that Ontario pays the same for Alberta and BC's gas as Michigan does.

PRoduction - exports to US - TarSands = Cdn Consumer. And do you really imagine that there will be no political repercussions in Canada when the consumer is last in line. No! consumers are taxpayers and voters. They will not stand last in line. What is more likely to happen is that NAFTA gets scrapped in the hard times and the TarSands get limited supplies. Then Canadians will be able to continue to heat their homes. So the real equation will be Production - Cdn Consumer - Tar Sands = exports to US.

Hey Benk,

A wonderful analysis.

They always used to tell me that Fort Brag just across the border from Ottawa was put there specifically in case Canadians decided not to do what the US wanted. An hours drive and Canada would be taken over.

I thought NAFTA was a Canadian sell out. We had constant arguments when they doublecrossed us on softwood and etc.

We are Woosies and cannot say no. In 2030, my children will need the natural gas we are exporting now, much more than the few imported dollars they are spending on their present mindless consumption.

My point is (I am guilty too) that we can do a beautiful analysis of how we are depriving our children and certainly our grand children of their resources so we can make a few bucks.

At what point do we and all those other Export Land Models get to realize that our earned profits will be gone the day after the resources are gone. Siberia and Canada are two places that should never ever sell any BThU's.

Can we not see that Nauru Island is the reality model.

Hi Benk,

Great article! The WCSB is critical for both Canada and the US. I have some trivia you might be interested in. The NEB Energy Futures to 2030 went to press *before* the Short Term 2007-2009 Outlook, which is more pessimistic. The issue that seems to have sideswiped all the predictions is how fast drilling costs have risen. The next short term outlook should be out this fall. We will see if the recent rise in prices revives drilling rates.

The issue is how fast will drilling have rise to keep production flat. And to answer that, you need to know how the size of the average nat gas pool is shrinking. The Canadian Gas Potential Comittee has this data, but it costs $4,000 for a copy. They collect well data and then analyze for the size of future finds.

http://www.canadiangaspotential.com/report2005.html

David Hughes gives a summery of the findings in a global public media presentation here:

http://globalpublicmedia.com/transcripts/827

So, roughly 90% of what's left of the undiscovered resources are contained in probably 250,000 pools. It takes us two wells to find each one - that's 500,000 wells to find the last 30% of Canada's gas. To put that in perspective: we've drilled 300,000 wells to find the first 70%, so we can see that's the treadmill, the law of diminishing returns

I am glad to read an honest report. Mind you, you forgot to mention that for YEARS CANADA EXPORTED OUR "EXCESS" NATURAL GAS TO America FOR FREE until America chose to not embarrass itself and pay Canada a small STIPEND. Personally I should like to take the "blue collar workers" in Ohio especially and THROTTLE them re our Canadian part of NAFTA(also Mrs. Clinton and the Mr. Obama) None of these people have an inkling of what America gained in NAFTA and what Canada gave up and these information is correct. Canada MUST SUPPLY AMERICA equal heating as Canadians use even if there is none left for Canadians. The other is that America can CLAIM CANADA'S CLEAN WATER RESOURCES IF AMERICA RUNS OUT OF WATER. As a Canadian I would IMMEDIATELY TEAR UP THIS ONE SIDED AGREEMENT and as an American AND Canadian economist stated, "If the U.S. runs out of fuel they will be cool BUT IN CANADA WE SHALL FREEZE TO DEATH!!" We have FREE TRADE and yet Canadians STILL MUST PAY TARIFF ON PRODCTS COMING FROM THE AMERICA!! WHY!!!

Canada has GIVEN AWAY its natural resources to America and others without regard to home supply for the future. Now it is COSTING TO DEVELOP AND GET AT THESE RESOURCES. These resource giants Give NOTHING TO CANADA AND LEAVE CANADIAN TAXPAYERS FOOTING THEIR POLLUTION CLEANUP BILLS!!

I shudder to think of what my children and now my GRANDCHILDREN will have to do to survive in this new economic reality with continuing corrupt governments who worry about party loyalty and their personal BOTTOM LINES without any regard for Canada's future. Sell everything as fast as we can until there is NOTHING LEFT and NO PLACE TO IMPORT FROM!! We are just beginning to pay the price for the rape of Canadian resources and the LIES AND MISINFORMATION
Canadians receive about the STATE OF OUR NATURAL RESOURCE NUMBERS AND OTHER REALITY INFORMATION.

Yet I feel for America who had to save the world from at least 2 world wars and this doesn’t even touch all the subsidizing of various countries of the world who receive billions of dollars of free money and food aid etc., and these countries have the nerve to throw sand in America’s face for helping them to cope. Yet who helps America in disaster- basically no one. If I were America I would withdraw much of this free aid to countries if they bad mouth America because America does not deserve the ongoing nasty criticism they receive from these little potentates who use America’s aid to line their corrupt government POCKETS with very little going to the people in need!! America has always been far too generous and it is NOW COSTING THEM AND THE WORLD.

REMEMBER as America rises or fall SO DOES THE WORLD ECONOMIES and RECESSION only this time will be A TERRIBLE UNENDING DEPRESSION!!

Sincerely,

Timothy Kritsch