Alberta Natural Gas Production to Decline by 15 % by 2009

According to Claudia Cattaneo of the Financial Post, "Gas Output to Plummet" weaves us a story of how conventional natural gas production is posed to decline 7 % per annum over the next couple of years.

No shit.

Quote of the day:

"Drilling for natural gas is in a deep recession unique to Western Canada because of high costs, the high Canadian currency and less-productive wells as the basin matures."

Point number two is a red herring, the Canadian dollar was much lower when this decline in drilling rates started. It's certainly an issue now, as a subset of point one, but it wasn't the proximate cause. The real issue is point three, that the resource is in decline, which in turn means that the cheapest gas is gone. The North American price for natural gas remains rather low, so expect a squeeze, especially if LNG isn't deployed fast enough to cover the shortfall. As we saw in 2005/6, natural gas prices are considerably more volatile than oil, due to the less fungible nature of gas compared to oil.

Those bitumen sands upgrading operations that are relying on natural gas to add hydrogen to their asphalt better pay attention. If it comes down to a question of heating homes or running refineries, you're going to lose your supply.