Gas industry’s 2009 profit will be 60 per cent below last year: Conference Board

The Conference Board of Canada estimates profits for the country’s natural gas producers will hit a 10-year low this year.

CALGARY — The Conference Board of Canada estimates profits for the country’s natural gas producers will hit a 10-year low this year.

The Ottawa-based economics think-tank said Friday the gas industry’s overall profit will total just $2.3 billion this year, down 60 per cent from last year and the lowest since 1999.

It also says output by Canadian gas producers will be down five per cent in 2009 from last year’s level, which was 5.2 per cent below 2007 output.

“So much has changed for the natural gas industry in just one year,” said Todd Crawford, an economist with the board. “Last year, revenues more than doubled over the first six months as gas prices skyrocketed. Now, low prices and the tough credit conditions have created a perfect storm that sent drilling activity in Canada tumbling this year. ”

While lower natural gas prices are a benefit to consumers who will heat their homes this winter or rely on electricity produced from gas-fired generation stations, it’s not certain whether all the benefits of lower prices will be passed on to gas users.

That’s because many utilities and distributors have long-term supply contracts that lock them in to paying higher prices than the current spot price.

The other fallout from lower prices is that it weakens the financial state of the country’s gas producers, which account for a big chunk of drilling activity in Alberta, in particular.

In its report, the Conference Board said it expects gas-sector profits will begin to grow again in 2010.

The report comes a day after the National Energy Board said it’s expecting Canada’s natural gas market to tighten over the next two years.

In a report Thursday, the federal energy regulator said the current downturn in Canadian natural gas drilling will put a “significant dent” in supplies between this year and 2011.

Natural gas prices have tumbled from a high of US$13 per 1,000 cubic feet in July 2008 to below US$2 per 1,000 cubic feet earlier this month, prompting many energy companies to rein in their drilling.

Prices have since rebounded somewhat, but still languish well below the levels many companies need to make their activities economically viable.

Less than half the number of rigs were working in Canada this week compared to a year go.

According to the Canadian Association of Oilwell Drilling Contractors, there were 193 rigs active the week of Sept. 15, compared to 410 at the same time of 2008.

Production from new and existing conventional natural gas wells, which represent a big portion of North American supply, is expected to decline.

But unconventional activity in tough-to-access tight gas and shale gas reservoirs is expected to continue at modest levels into next year, as the industry hones its drilling and fracturing technology.

Overall deliverability — the ability to produce gas from new and existing wells — is expected to decline by 17 per cent by 2011.

The recession has eaten away at demand from natural gas, namely from industrial users who use the commodity for electrical generation.

However, Canadian demand is expected to rise six per cent between now and 2011, with the biggest increase coming from Alberta oilsands developers.

Natural gas is used to generate power and create steam for many oilsands projects.

Just Posted

Red Deer County agrees to provincial oilpatch tax break

Municipal taxes paid by shallow gas producers cut by 35 per cent

To rake, or not to rake, in Red Deer

Providing hibernation habitat for native insects

‘It used to be non-stop booming’

Red Deer oilfield-related company shutting its doors after 25 years

Alberta joining class-action lawsuit against opioid manufacturers, distributors

CALGARY — The Alberta government says it’s joining a class-action lawsuit to… Continue reading

First Nations displaced by storm share concerns with Scheer campaign

WINNIPEG — Families forced to flee the Lake Manitoba First Nation are… Continue reading

Your community calendar

Wednesday Red Deer River Naturalists Flower Focus Group Meeting. When: Oct. 16… Continue reading

It’s hard to imagine a majority government

On the heels of the last French-language debate of the campaign, Conservative… Continue reading

Opinion: Dangerous election talk from NDP leader Singh

Federal NDP Leader Jagmeet Singh already lacked credibility by ignoring any attempt… Continue reading

City spinning its wheels on better cycling tracks

Re: “No ‘climate’ emergency for Red Deer; Mayor says council prefers action… Continue reading

An appreciation for Alberta’s plight would be nice

I watched with dismay and chagrin, the debate Thursday night of our… Continue reading

Canada’s mixed doubles curling team downs Slovakia at world championship

ABERDEEN, Scotland — Canada remained undefeated through round-robin play at the world… Continue reading

Canada coach John Herdman promises ‘blood, guts and thunder’ against U.S.

TORONTO — Coach John Herdman promises “blood, guts and thunder” when Canada… Continue reading

Brazen thief steals $20,000 Dali artwork in San Francisco

SAN FRANCISCO — A brazen thief stole a Salvador Dali etching valued… Continue reading

Most Read