Natural Gas Facts
What is unconventional natural gas?
Natural gas from coal (also known as coalbed methane), tight gas sands, gas shales and gas hydrates are often referred to as unconventional gas resources. Methane is the main component of unconventional natural gas, but other constituents vary and may have to be removed to produce sales grade natural gas. Sales grade natural gas is the cleanest burning fossil fuel.
Unconventional gas is the same substance as "conventional" natural gas. It is the unusual characteristics of the reservoirs that contain unconventional gas that lead to the unconventional designation. The common characteristic of the different types of unconventional gas resources is that they contain large quantities of natural gas, but it is usually more difficult to produce this gas as compared to conventional reservoir rocks. New technologies are continually being developed to allow more accurate estimations of the amount of gas in these unconventional reservoirs and to stimulate these rocks to produce the gas.
How is unconventional natural gas used?
Because unconventional gas is essentially the same substance as conventional natural gas, it has exactly the same uses as conventional natural gas.
- electricity generation
- steam heat production
- industrial uses such as processing forest products and manufacturing steel, fertilizers and cement
- domestic uses such as fuel for space and water heating, climate control systems, appliances and vehicles
- raw materials in the manufacture petrochemicals and as a source of hydrogen in heavy oil and bitumen upgrading
Why is unconventional natural gas important?
While natural gas has been used locally as an energy source in various parts of Canada since the 1800s, it did not gain widespread popularity until the late 1950s when the TransCanada Pipeline was completed. Demand for natural gas grew dramatically in the late 1970s when crude oil prices soared. As concern for the environment increased, the cleaner burning nature of natural gas further enhanced its popularity.
From 1990 to 2008, Canadian demand for marketable natural gas has increased 33.6 per cent to 199.3 million cubic metres per day from 149.2 million cubic metres per day. Export demand has risen even more dramatically, to 282 million cubic metres per day from 111.5 million cubic metres per day, an increase of 153 per cent. To put this in perspective, 100 million cubic metres of natural gas is enough to fuel roughly 45,300 gas-heated homes in Canada for one year and is worth about $20.5 million at today's average residential prices.
In response to this increasing demand, annual marketed production has increased 64.6 per cent to 167,515 million cubic metres in 2008 from 101,762 million cubic metres in 1990, peaking at 179,216 million cubic metres in 2001. On a daily basis, net production has increased to 457.7 million cubic metres from 278.8 million cubic metres, peaking at 491 million cubic metres. Net supply, including production and imports has risen 79.9 per cent to 501.1 million cubic metres per day from 278.8 million cubic metres per day.
From 1990 to 2007, steadily increasing demand resulted in steadily increasing production. Consequently, marketable reserves of known conventional gas have dropped 40.0 per cent to 1,633.8 billion cubic metres) from 2,725.4 billion cubic metres. Another factor affecting reserves is that the more recently discovered reservoirs are generally smaller in volume and have steeper production decline rates than reservoirs discovered prior to the mid 1980s.
At current rates of production, and with no new discoveries, the reserve life index for Canadian natural gas is 9.75 years. This does not mean that Canada will "run out of gas" in 9.75 years, but that current rates of production will be difficult to maintain and sustain at current levels without significant new sources, such as unconventional natural gas, being developed and added to production.
According to many sources, demand for natural gas will remain high; however, the available reserves of natural gas are somewhat in question. The National Energy Board, in its recent publication, Canada's Energy Future - Scenarios for Supply and Demand to 2030, states "Fossil fuel energy continues to be the dominant source of supply, although non-conventional and non-fossil fuel supplies begin to play a larger role.
Conventional resources that have been the backbone of energy supply throughout the twentieth century are growing increasingly mature, requiring ever greater physical and financial inputs to produce diminishing increments of supply. Future opportunities for significant incremental supply growth are likely to originate from unconventional energy sources such as oil sands, coalbed methane (CBM), oil and gas shales, improved recovery techniques, off-gases from bitumen upgraders, and coal gasification.”
As initial supplies that are easy to find, simple to develop and inexpensive to produce are consumed, industry must turn to both conventional and unconventional supplies that are increasingly difficult to find, more complicated to develop and more expensive to produce.
In the past few years, exploration, development and production technologies have improved to the point that industry now produces gas from reservoirs that were prohibitively expensive just a few years ago, technically difficult to produce or that industry was incapable of finding. However, these smaller, more technically complex reservoirs are being depleted at a rapid rate. Industry must look beyond conventional sources.
Frontier regions have enormous potential, but their large-scale development is still some years off. Unconventional gas is viewed as being a good candidate for filling the gap because:
- Unconventional gas is already being produced in some parts of the country.
- Existing infrastructure, including pipelines, can be used to produce and transport unconventional gas.
- The service infrastructure established for conventional gas reservoirs can be employed by the unconventional gas industry with minimal changes.
- The current regulatory structure does not require substantial changes to accommodate development of unconventional gas.