Relevant • Independent • Objective
PAGE 1
July 2010
CERI Commodity Report - Natural Gas
CERI COMMODITY REPORT - NATURAL GAS
Editor-in-Chief: Mellisa Mei ([email protected])
CONTENTS
FEATURED ARTICLE................................................ 1
NATURAL GAS PRICES ........................................... 3
WEATHER ............................................................... 5
CONSUMPTION AND PRODUCTION ......................... 7
TRANSPORTATION ................................................. 9
STORAGE ................................................................11
LIQUEFIED NATURAL GAS ......................................14
DRILLING ACTIVITY................................................16
Ontario’s Future Shale GasRevolution?
With Ontario’s natural gas demand anticipated to grow inthe coming years, particularly in the industrial and electricgeneration sectors, Ontario will become more dependenton imported natural gas if the unconventional natural gasresources within the province are left unexploited.
Ontario is not the first province one would think of whenconsidering natural gas production in Canada. Currently,Ontario does not produce sufficient quantities of naturalgas to meet the province’s natural gas demand. In fact,only 2 percent of the natural gas that is consumed annuallyin Ontario is produced within the province,1 with theremaining volumes supplied by western Canada, orimported from the US. This may change if large-scalecommercial production from Ontario’s shale gas resourcescan be achieved. However, more information on Ontario’sshale gas potential is first required.
Ontario’s production of natural gas, which begancommercially in 1889, peaked in the 1980s, and has beendeclining ever since. In 2009, Ontario’s total marketable
natural gas production was approximately 7.7 BCF, or 21MMCFPD. Based on historical production trends, theNational Energy Board is expecting Ontario’s natural gasproduction to remain relatively constant over the next twoyears.2 Figure 1 illustrates Ontario’s historic natural gasproduction between 2000 and 2009.
Figure 1: Natural Gas Production in Ontario,2000-2009
Source: CERI.
There exist four sedimentary basins within the provinceof Ontario, which potentially contain crude oil, natural gas,and salt resources. The Hudson Bay Basin and the MooseRiver Basin are located in northern Ontario, where noproduction has occurred to date. South of the CanadianShield, are the Michigan and Appalachian Basins, whichextend north from the US. Figure 2 displays the foursedimentary basins, along with the Canadian Shield,Algonquin Arch, and Limit of Phanerozoic.3
Ontario is endowed with shale gas resources that aregeologically equivalent to those found in the northeast US(Devonian Antrim shale and Marcellus shale), and theprovince of Quebec (Ordovician Utica shale). The UpperOrdovician Collingwood Member of the Lindsay Formation,the Eastview Member of the Lindsay Formation, the UpperOrdovician Blue Mountain and Billings Formations, lateMiddle Devonian Marcellus shale, and the Upper DevonianKettle Point Formation have been identified by the OntarioGeological Survey (OGS) as the most promising shale gas
CERI Commodity Report - Natural Gas
PAGE 2
units in Ontario. Other bedrock units with shale gaspotential include the Shadow Lake, Carlsbad, Cabot Head,Rochester Formation, the Salina, Hamilton and PortLambton groups.5
Because Ontario’s shale gas units have not yet beenassessed, the OGS has commenced work on a multi-yearstudy to characterize the parameters of bedrock units withshale gas potential in southern Ontario. The projectinvolves aggregating data on total organic carbon (TOC),mineralogy, maturity, depth, and thickness, sourced fromprevious research, analyzing previously collected samples,and drilling boreholes to obtain new data.6
Table 1 shows the accumulated data on TOC for each ofseveral shale gas units in Ontario.
Table 1: Total Organic Carbon of SelectOntario Shale Gas Units
Source: Sedimentary Geoscience Section, Ontario Geological Survey7
The data collected by the OGS will be used to generateTOC and maturation maps of shale gas units in southernOntario, and to identify prime drilling areas.
Once Ontario’s shale gas resource is quantified, andassuming that the resource can be recovered economically,Ontario can begin the process of reducing its dependenceon imported natural gas.
Endnotes
1 Crude Oil and Natural Gas Resources, Ontario Ministry ofNatural Resources, Natural Resource Management Division,December 28, 2007. http://www.mnr.gov.on.ca/en/Business/OGSR/2ColumnSubPage/STEL02_167105.html.Accessed on August 10, 2010.2 Short-term Canadian Natural Gas Deliverability: An EnergyMarket Assessment, March 2010 Appendices, National EnergyBoard, March 2010. http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/ntr lgs/ntr lgsdlvrblty20102012/ntrlgsdlvrblty20102012ppndc-eng.pdf. Accessed on August10, 2010.3 1. Canadian Shield; 2. Algonquin Arch; 3. Hudson Bay Basin;4. Moose River Basin; 5. Michigan Basin; 6. Appalachian Basin;7. Limit of Phanerozoic.4 Crude Oil and Natural Gas Resources, Ontario Ministry ofNatural Resources, Natural Resource Management Division,December 28, 2007. http://www.mnr.gov.on.ca/en/Business/OGSR/2ColumnSubPage/STEL02_167105.html.Accessed on August 10, 2010.5 Béland Otis, C. 2009. Shale gas assessment project,southern Ontario; in Summary of Field Work and OtherActivities 2009, Ontario Geological Survey, Open File Report6240, p.30-1 to 30-4.6 Ibid.7 Ibid.
Figure 2: Sedimentary Basins of Ontario
Source: Ontario Ministry of Natural Resources4
Ontario Shale Gas Unit TOC Upper Ordovician Collingwood Member Up to 11% Blue Mountain Formation Up to 9% Eastview Member Up to 2.7% Billings Formation Up to 4.2% Late Middle Devonian Marcellus shale Up to 4% Upper Devonian Kettle Point Formation Up to 15%
Relevant • Independent • Objective
PAGE 3
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CERI Commodity Report - Natural Gas
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CERI Commodity Report - Natural Gas
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PAGE 8
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CERI Commodity Report - Natural Gas
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CERI Commodity Report - Natural Gas
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•War
mer
than
norm
alw
eath
erco
nditi
ons
have
resu
lted
inlo
wer
mon
thly
natu
ralg
asst
orag
ein
ject
ions
inbo
thC
anad
aan
dth
eU
S,
rela
tive
toin
ject
ions
mad
ein
the
sam
em
onth
last
year
,and
the
five-
year
aver
age.
•Dur
ing
the
mon
thof
July,
wor
king
gas
inC
anad
ian
stor
age
incr
ease
dby
appr
oxim
atel
y10
perc
ent,
to48
8.8
BC
F.Th
evo
lum
eof
natu
ralg
asin
stor
age
atth
een
dof
July
2009
was
37.4
BC
Fhi
gher
.•In
ject
ions
into
east
ern
and
wes
tern
Can
adia
nst
orag
eto
tale
d15
.2B
CF
and
30B
CF,
resp
ectiv
ely,
asof
July
30.
•InJu
ly,to
taln
atur
alga
sin
ject
ions
into
Can
adia
nst
orag
ew
ere
near
ly31
perc
ent
belo
wth
e5-
year
aver
age
of61
BC
F.•A
sof
July
30,
the
volu
me
ofna
tura
lgas
held
inU
Sst
orag
efa
cilit
ies
tota
led
2.9
TCF,
4.6
perc
ent
belo
wst
orag
ele
vels
reco
rded
inth
epr
evio
usye
ar,
but
8.5
perc
enta
bove
the
5-ye
arav
erag
e.•D
urin
gth
em
onth
ofJu
ly,na
tura
lgas
stor
age
inje
ctio
nsin
the
east
ern
cons
umin
gre
gion
acco
unte
dfo
r76
perc
ento
ftot
alin
ject
ions
into
US
stor
age.
•Sto
rage
inje
ctio
nsin
the
US
prod
ucin
gre
gion
and
the
wes
tern
cons
umin
gre
gion
tota
led
36B
CF
and
28B
CF,
resp
ectiv
ely.
Relevant • Independent • Objective
PAGE 13
SOU
RCE
: C
ERI,
Pla
tts
Gas
Dai
ly.
SOU
RCE
: C
ERI,
Pla
tts
Gas
Dai
ly.
SOU
RCE
: C
ERI,
Pla
tts
Gas
Dai
ly.
SOU
RCE
: C
ERI,
Pla
tts
Gas
Dai
ly.
-100-8
0
-60
-40
-20020406080100
JF
MA
MJ
JA
SO
ND
5-Ye
ar A
vg.
2009
2010
US
Wes
tern
Con
sum
ing
Reg
ion
Sto
rage
In
ject
ions
/Wit
hdra
wal
sB
CF,
Mon
th E
nd
-700
-500
-300
-10010
0
300
500
JF
MA
MJ
JA
SO
ND
5-Ye
ar A
vg.
2009
2010
US
Eas
tern
Sto
rage
In
ject
ions
/Wit
hdra
wal
sB
CF,
Mon
th E
nd
-250
-200
-150
-100-5
0050100
150
200
JF
MA
MJ
JA
SO
ND
5-Ye
ar A
vg.
2009
2010
US
Pro
duci
ng R
egio
n S
tora
ge
BC
F, M
onth
End
-100
0
-800
-600
-400
-2000
200
400
600
800
JF
MA
MJ
JA
SO
ND
5-Ye
ar A
vg.
2009
2010
US
Sto
rage
In
ject
ions
/Wit
hdrw
als
BC
F, M
onth
End
CERI Commodity Report - Natural Gas
PAGE 14
SOU
RCE
: U
.S.
DO
E.SO
URCE
: U
.S.
DO
E.
SOU
RCE
: U
.S.
DO
E.SO
URCE
: U
.S.
DO
E.
024681012141618202224
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9Fe
b-10
Apr
-10
Jun-
10
Cov
e Po
int
Elba
Isla
ndEv
eret
tNE
Gat
eway
Nep
tune
Eas
tern
US
LN
G I
mpo
rts
By
Faci
lity
BC
F
024681012141618202224
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9Fe
b-10
Apr
-10
Jun-
10
Gul
f Gat
eway
Free
port
Lake
Cha
rles
Sabi
ne P
ass
Cam
eron
US
GO
M L
NG
Im
por
ts B
y Fa
cilit
yB
CF
0510152025303540
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9Fe
b-10
Apr
-10
Jun-
10
Egyp
tNi
geria
Trin
idad
Norw
ayQ
atar
BC
F
US
LN
G Im
port
s B
y O
rigi
n
02468101214
JF
MA
MJ
JA
SO
ND
2008
2009
2010
Vol
ume-
Wei
ghte
d A
vera
ge L
NG
Pri
ceV
olum
e-W
eigh
ted
Ave
rage
LN
G P
rice
US$
/MM
Btu
Relevant • Independent • Objective
PAGE 15
SOU
RCE
: E
IA,
U.S
. D
OE.
SOU
RCE
: U
.S.
DO
E.
01234567
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9Fe
b-10
Apr
-10
Jun-
10
US
LN
G E
xpor
ts t
o Ja
pan
BC
F
01234567
Jun-
09A
ug-0
9O
ct-0
9D
ec-0
9Fe
b-10
Apr
-10
Jun-
10
Con
ocoP
hilli
psM
arat
hon
US
LN
G E
xpor
tsB
y E
xpor
ter
BC
F
SOU
RCE
: U
.S.
DO
E.SO
URCE
: U
.S.
DO
E.
LNG
Im
port
ers
in 2
010
US
LNG
Impo
rter
s in
201
0 (A
s of
Jun
e 30
, 201
0)
Com
pany
Volu
me
(BC
F)
% o
f Tot
al
LNG
Im
port
sB
G L
NG
Ser
vice
s92
.136
.8D
istr
igas
77.0
30.8
Exc
eler
ate
14.7
5.9
Stat
oil
25.9
10.4
BP
Ene
rgy
Com
pany
8.8
3.5
Tota
l Gas
& P
owe r
20.2
8.1
Sem
pra
LNG
Mar
ketin
g4.
21.
7C
hevr
on U
.S.A
.4.
41.
7S
hell N
A LN
G3.
01.
2To
tal
250.
210
0.0
Can
adia
n LN
G Im
port
ers
in 2
010
(As
of M
ay 3
1, 2
010)
Com
pany
Volu
me
(BC
F)%
of T
otal
LN
G
Impo
rts
Rep
sol E
nerg
y C
anad
a Lt
d.37
.810
0To
tal
37.8
100
LNG
Shi
pper
s in
201
0
LNG
Shi
pper
s to
the
US
in 2
010
(As
of J
une
30, 2
010)
Com
pany
Volu
me
(BC
F)%
of T
otal
LN
G
Ship
men
ts
Atla
ntic
LN
G 2
/3 C
ompa
ny7.
43.
0A
tlant
ic L
NG
Com
pany
28.7
11.5
BG
9.1
3.6
ELN
G/B
GG
M41
.016
.4G
as N
atur
al A
prov
isio
nam
ient
os18
.77.
5A
tlant
ic L
NG
8.8
3.5
Nig
eria
LN
G L
imite
d25
.410
.1P
FLE
5.9
2.4
Trin
ling
11.1
4.4
She
ll E
aste
rn L
NG
3.0
1.2
GD
F S
uez
14.1
5.6
Ras
Gas
LN
G4.
41.
7R
asG
as7.
02.
8
Qat
ar L
ique
fied
Gas
Com
pany
Lim
ited
(II)
13.8
5.5
Ras
Laf
fan
2.8
1.1
Sta
toil A
SA
, RW
E-D
ea N
orge
AS
, Hes
s N
orge
AS
5.8
2.3
BG
Gas
Mar
ketin
g Lt
d3.
01.
2S
tato
il A
S A17
.16.
8Ye
men
LN
G C
ompa
ny L
td.;
TOTA
L G
as &
Pow
er L
td.
6.3
2.5
Tota
l Gas
& P
ower
Lim
ited
5.8
2.3
GD
F S
uez
Sup
ply
7.6
3.0
BG
GS
TL/B
GL T
2.9
1.1
Atla
ntic
LN
G 2
/3 C
ompa
ny0.
40.
2To
tal
250.
210
0.0
CERI Commodity Report - Natural Gas
PAGE 16
SOU
RCE
: C
ERI,
CAO
DC,
Bak
er H
ughe
s.SO
URCE
: C
ERI,
CAO
DC.
SOU
RCE
: C
ERI,
CAO
DC.
SOU
RCE
: C
ERI,
CAO
DC.
0
500
1,00
0
1,50
0
2,00
0
2,50
0
3,00
0 Jan-
02Ja
n-03
Jan-
04Ja
n-05
Jan-
06Ja
n-07
Jan-
08Ja
n-09
Jan-
10
WC
SBU
S
Nor
th A
mer
ica
n A
ctiv
e R
igs
Rig
s
0
100
200
300
400
500
600
700
800
900
1,00
0 Jan-
02Ja
n-03
Jan-
04Ja
n-05
Jan-
06Ja
n-07
Jan-
08Ja
n-09
Jan-
10
Act
ive
Rig
sTo
tal R
ig D
rillin
g Fl
eet
Can
adia
n R
ig F
leet
Uti
lizat
ion
Wee
kly
Ave
rag
e A
ctiv
e R
igs
Rig
s
0
100
200
300
400
500
600
700 Ja
n-08
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10
BC
AB
SK
WC
SB
Act
ive
Rig
s by
Pro
vinc
eW
eekl
y A
vera
ge
Rig
s
-
100
200
300
400
500
600
700
800
15
913
1721
2529
3337
4145
49
5-Ye
ar A
vg.
2009
2010
Wes
tern
Can
ada
Act
ive
Rig
sW
eekl
y A
vera
ge
Rig
s
Wee
k N
umbe
r
Relevant • Independent • Objective
PAGE 17
SOU
RCE
: C
ERI,
Bak
er H
ughe
s.SO
URC
E:
CERI
, Ba
ker
Hug
hes.
SOU
RCE:
CE
RI,
Bake
r H
ughe
s.
0
500
1,00
0
1,50
0
2,00
0
2,50
0 Jan-
02Ja
n-03
Jan-
04Ja
n-05
Jan-
06Ja
n-07
Jan-
08Ja
n-09
Jan-
10
Ons
hore
Gas
-Dire
cted
GO
M G
as-D
irect
edTo
tal O
il-D
irect
ed
Rig
s
US
Tot
al A
ctiv
e R
igs
0 20
40
60
80
100
120
140 Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07Ja
n-08
Jan-
09Ja
n-10
Oil-
Dire
cted
Gas
-Dire
cted
US
Gul
f of
Mex
ico
Act
ive
Rig
sR
igs
0%10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1,00
0
1,20
0
1,40
0
1,60
0
1,80
0
2,00
0
2,20
0 Jan-
02Ja
n-03
Jan-
04Ja
n-05
Jan-
06Ja
n-07
Jan-
08Ja
n-09
Jan-
10
Oil-
Dire
cted
Gas
-Dire
cted
Gas
-Dire
cted
%
US
Tot
al A
ctiv
e R
igs
Rig
s
Nor
th A
mer
ican
Rig
Act
ivit
y
•The
aver
age
num
ber
ofrig
sop
erat
ing
inth
eW
CS
Bin
crea
sed
from
211
rigs
inJu
neto
335
rigs
inJu
ly.•R
igac
tivity
inA
lber
taan
dS
aska
tche
wan
acco
unte
dfo
r65
perc
ent
and
22pe
rcen
tof
the
aver
age
mon
thly
incr
ease
inac
tive
WC
SB
rigs,
resp
ectiv
ely.
•Yea
r-ov
er-y
ear,
WC
SBrig
activ
ityha
sin
crea
sed
by10
8pe
rcen
t.•T
heav
erag
eW
CS
Brig
utiliz
atio
nra
tein
crea
sed
from
27pe
rcen
tin
June
to42
perc
enti
nJu
ly.•T
heU
Sto
talr
igco
unt
incr
ease
dby
appr
oxim
atel
y3
perc
ent,
over
the
past
mon
th,
toan
aver
age
of1,
573
activ
erig
s.•A
sof
July
30,
the
aver
age
num
ber
ofna
tura
lgas
-dire
cted
rigs
oper
atin
gin
the
US
incr
ease
dby
18rig
s,to
971
rigs.
•InJu
ly,na
tura
lgas
rigs
oper
atin
gin
the
GO
Mac
coun
ted
for
less
than
1pe
rcen
tof
alla
ctiv
ega
s-di
rect
edrig
sin
the
US
.•C
ompa
red
toJu
ly20
09,
the
aver
age
num
ber
ofga
s-di
rect
edrig
sin
the
GO
Mha
sde
clin
edby
73pe
rcen
t,w
hile
the
num
bero
fact
ive
on-s
hore
rigs
has
incr
ease
dby
50pe
rcen
t.