While both the Liberals and Conservatives in Parliament talk up the potential of the Tar Sands to keep votes in Alberta… the reality on the ground is starting to really hurt the revenues of Canadas’ richest province.
As far back as August last year, at the apex of the oil price shock, there have been major warning signs that peak oil and gas production was starting to hurt Albertas revenue/royalty stream.
From the article last year:
Natural gas provides about $6 billion of the province’s $10 billion oil and gas resource revenue and accounts for most of the roughly $27 billion spent each year to explore for conventional hydrocarbons – which, incidentally, dwarfs high-profile oilsands spending.
In 2008, Canada’s natural gas output and drilling have both been in decline, while south of the border the natural gas drilling business is going flat out and gas output is up. Provincially, gas production is up markedly in British Columbia – but given Alberta’s 90 per cent weight in Canadian production, Wild Rose Country’s performance is pulling Canada’s national figures sharply lower.
This is the definition of Peak Oil my friends… pouring more and more money into exploration/wells just to offset the production lost due to a peaked resource… and because Natural Gas tends to decline much more sharply than Oil, the reliance on Gas royalties puts Alberta in an even worse position.
And now that oil prices are “low” at $50, oil companies don’t want to invest in a futile effort… here is yesterdays article:
Natural gas makes up two-thirds of all activity in the oilpatch and production has fallen almost 15 per cent over the past two years, taking the biggest contributor to the government’s revenue stream down with it. From a peak of about 14 billion cubic feet a day in 2001, Alberta’s gas production has steadily slid to a little more than 12 billion cubic feet at present.
So what? you might say… we have the Tar Sands. Well, without Natural Gas, you have no tar sands as it is required to melt or steam the oil out of the sand.
The implications of Peak Oil and Gas in Alberta?
- Alberta will likely be a “have-not” province within 5 years, and stay that way indefinitely, much like the maritime provinces
- Natural Gas prices in North America will rise sharply over the next few years as US production starts to fall and increased demand from a recovering economy and rejection of foreign oil takes hold.
- A nuclear energy plant will be built somewhere near Fort Mac in order to replace the energy lost to declining Natural Gas.
- LNG imports into North America will increase putting more upward momentum on Natural Gas prices.
- NAFTA will be center stage once more, as the clause requiring Canada to export its fossil fuels to the US starts to worry citizens and politicians alike.