Canada gears up to meet its own needs as it seeks to fill voracious US demand.

Rigs are turning right into deeper formations, seismic crews have scoured Arctic and Atlantic depths, and producers are reaching for stranded resources as Canadian operators put US market needs on top of their priority lists.
The goal for this accelerated activity is the need to meet up to 30 Tcf of demand in the United States by 2010 and 34.7 Tcf by 2020. The driver is high gas prices and a forward strip on the futures market that says they can sell their gas at $4.50/MMBtu through 2005.
Those dates are a long time in the future for many people. A closer look by Pete Stark, vice president of industry relations for IHS Energy Group, indicates the United States will need 2.3% more natural gas - 23.1 Tcf total - this year, than last. The nation entered the heating season last year with low levels of gas in storage, and low temperatures caused strong drawdowns. It will take 0.5 Tcf to 0.75 Tcf of gas just to get storage back to normal. US consumers will need 500 Bcf/d of gas to feed 70,000 mw of new power coming on line. That's an increase of more than 1 Tcf needed just this year.
Additional gas from the deepwater Gulf of Mexico, about 500 Mcf/d, isn't replacing the production declines on the shelf. Although new discoveries are being made, more and more people are turning to Canada as the best hope to help satisfy the rising demand.
Canadian supplies
Canada has gas. Terry Rochefort, with the Canadian National Energy Board, speaking at the Ziff Energy North American Gas Strategies Conference in Houston, Texas, estimated ultimate potential conventional gas resources between 587 Tcf and 658 Tcf.
The Scotian Shelf, around Sable Island offshore eastern Canada, has some 18 Tcf in potentially recoverable gas. The Sable project already is producing 500 MMcf/d, and much of that is moving toward the industrialized US East Coast.
Further exploration is in the works around Sable Island after several successful bidding rounds that saw new players such as Kerr-McGee Corp. and Anadarko Corp. entering commitments to search. In addition, PanCanadian has put its Deep Panuke project on fast-track development. That discovery lies below its Panuke oil field. The first four wells have tested at more than 50 MMcf/d each.
Offshore Newfoundland and the eastern offshore all the way to the Arctic hold another estimated 136 Tcf of gas, but that development is a long way into the future.
Canada's biggest gas-producing region is the Western Canada Sedimentary Basin, primarily in Alberta and Saskatchewan, with between 264 Tcf and 335 Tcf of resources. Some 119 Tcf already has been produced from this region, Rochefort said.
Big discoveries are being made along the eastern foothills of Alberta and British Colombia, where wells are deep and expensive. The companies that have deciphered the geology are getting strong payback.
Even with those new discoveries in the east and west, Canada production is rising only moderately as Canadians experience high production declines from existing wells.
Go north
The best hope for supplies to meet growing demand appears to lie north of 60°N, where wells on the Liard Plateau just north of the northwestern Alberta border produce at rates as high as 75 MMcf/d.
The Northwest Territories has the potential to produce 11 Tcf, with another 64 Tcf potentially producible from the Mackenzie Delta and the Beaufort Sea in the Canadian Arctic. Some 6 Tcf in reserves have been discovered and proven. A pipeline already reaches the Liard Plateau, but Canadian officials anticipate an application for a new pipeline to the Arctic later this year.
Once that pipeline is built, the 94 Tcf of gas potentially available on and around the Arctic islands could begin to look more attractive.
"The Mackenzie Delta Production Group has gone beyond the feasibility study to commissioning conceptual engineering work," said Ron McIntosh, senior vice president and chief operating officer of Gulf Resources Canada Ltd.
Pipelines
The first step, however, is access to the Mackenzie Delta, and that's not as easy as it looks. It should be easy to build an 800-mile (1,287-km) pipeline straight up the Mackenzie Valley, where the terrain is fragile but reasonably friendly and where the citizens of the Northwest Territories have given their approval.
In preliminary planning, that line would carry 1 Bcf/d of gas to Alberta, where it would be distributed to the Lower 48 states. The line would cost between US $2.3 billion and $3 billion and would be paid for by tariffs on gas shipments from existing fields owned by Imperial Resources, Gulf Canada and Shell Canada. If that 6 Tcf of gas isn't enough, Petro-Canada drilled its first well on the delta last winter with Anderson Exploration as a partner. Chevron, Burlington Resources, Anadarko Petroleum and Murphy Oil also have bought property. Combined, they've committed $800 million to perform exploration and drilling activities in the northern part of the Northwest Territories in the next 5 years.
The Canadian drilling industry has built four new drilling rigs specifically for Arctic work, and seismic companies shot 5,000 miles (8,000 km) of seismic during the past winter.
The hitch is Alaska. Alaskan and US officials expect at least one application for a pipeline from the North Slope of Alaska to Alberta this year.
One plan calls for a 4 Bcf/d gas pipeline from the North Slope of Alaska south to Fairbanks and then along the existing highway through the Yukon Territory to Alberta. That's a $10 billion, 1,850-mile (2,977-km) project approved by Alaska and most of the native population in the Yukon.
Another plan called the Over The Top project would take North Slope gas east under the Beaufort Sea to the Mackenzie Delta and south through the Mackenzie Valley at a cost of $6 billion for 1,700 miles (2,735 km).
For those just looking at the dollar value, that's clearly the winning project. Detractors, however, say the underwater route is environmentally risky, even thought the pipe would be buried 15 ft
(5 m) below the floor of the Beaufort Sea. They also contend no one makes the thick-walled pipe that would be required, and no one has ever attempted to lay and maintain pipe under these conditions.
Alaska and the Yukon like the Alaska interior route, because to brings gas to communities without gas supplies and can feed industry along the way. Plans for that route are 20 years old, and the subject of a treaty between the United States and Canada.
At the Ziff Energy conference, Yukon Premier Pat Duncan said pointedly, "Over the Top would take environmental and regulatory review that would take years to complete. Don't underestimate the value of a treaty already signed, particularly since there's still a boundary dispute between Alaska and the Yukon."
Premier Stephen Kakfwi of the Northwest Territories likes the Over the Top plan, and if that doesn't work, he'll take the standalone Mackenzie Valley plan. But he and Forrest Hoglund, chairman and chief executive officer of Arctic Resources and author of Over the Top plan, ask why build two pipelines when one combined line will do the job?
Hoglund lined up the figures and said the two individual pipelines would cost $12.5 billion to build, while his combined line would cost $6 billion.
"Building two pipelines is good for pipe suppliers, not for consumers," Kakfwi said.
Another problem facing pipeline companies is that if they decide on the Alaska route and the Mackenzie Valley standalone route, the demand on pipe suppliers and construction companies will drive construction costs sky high.
And no matter which routes win out, the result will be the sudden addition of up to 5 Bcf/d of gas into Alberta, and building the pipeline resources to move that gas to destinations in the United States will be a monumental task. "I don't think there are enough pipeline resources to build both at the same time," said McIntosh.
Demand doesn't appear to be a problem. By the time the first pipeline is built - 2007 at the earliest - United States consumers will need the extra supplies, and more.
Said Kevin Meyers, president and chief executive officer of Phillips Alaska Inc., US demand will climb from 62 Bcf/d of gas in 2000 to 71 Bcf/d in 2010, and suppliers will have to find 52 Bcf/d to replace declining production and fill rising demand.
Tony Fountain, president of BP North America Gas & Power, had similar estimates. The North American market totaled about 26 Bcf/d of gas in 2000, and it will grow by another 4.9 Bcf/d in this decade, he said.