Industry officials differ over power plants' gas supply impacts

Quebec City, Quebec (Platts)--8Sep2005

New gas-fired power generation capacity in eastern Canada and the US
Northeast will strain an already-tight gas market over the next several years,
although industry officials differed Thursday on just how great the impact
will be.
     Paul DuMaresq, director of marketing for Shell Trading, said the Ontario
government's June 2004 call to reduce the province's reliance on coal-fired
electricity has resulted in about 25,000 MW of gas-fired replacement capacity
being proposed. He said those plants' "potential" gas consumption is about 73
petajoules/year, or about 7 Bcf annually.
     If all of those plants become operational, they would boost Ontario's
yearly gas consumption by about 8.5%, DuMaresq told the Industrial Gas Users
Assn's annual conference in Quebec City. "From an Ontario perspective, the gas
demand from these projects is going to increase quite a bit," he said.
He said, however, that 2,500 MW of new gas-fired capacity would increase total
Canadian gas demand by about 1.5% and overall North American consumption by
just 0.25%, which he called "a drop in the bucket...compared to total demand."
     "I am not trying to understate it by any stretch, but we are not going to
see the 'off-coal' program in Ontario lead to gas price increases" in the
broader market, DuMaresq said.
     In fact, he said storage capacity at the Dawn, Ontario, hub, as well as
current pipelines serving the region, should be able to serve the new power
plants without any expansions. And from a supply standpoint, "these projects
have access to huge volumes of supply" from several North American basins, he
said.
     But not everyone speaking at the IGUA conference was as optimistic. Haig
Vejprava, director of marketing for EnCana Gas Marketing, said North American
supply should increase by about 10 Bcf/d by 2014 from liquefied natural gas
imports and increased production of unconventional domestic gas.
     "But our estimates show that demand will increase by about the same
amount," in part because of new gas-fired power plants, which indicates little
relief from the current tight supply/demand balance, he said. 
     Steve Acker, director of marketing and origination for BP Canada Energy's
North American gas and power division, said growth in gas demand for
generation in eastern Canada and the US Northeast will average about 2.2%/year
for several years and "the question is, "Where is this supply going to come
from?' Gas from traditional North American basins will not meet demand." He,
as did several other speakers, noted that the decline rate from conventional
wells continues to rise as basins are "played out."
     Acker said the placement of new LNG import terminals in New England and
in the eastern Canadian provinces would go a long way toward filling the
regional supply gap, and he predicted that enough import capacity will be
built--despite resistance from local governments and residents.
     "There is no shortage of import and regasification projects [proposed]
for this region," he told the conference. And "while there appears to be a lot
of fear-mongering in North America, the LNG industry has an outstanding record
around the world--this technology has proven successful."

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