Market Snapshot: Northern Canada rich in natural gas resources, but current production continues to decline

Release date: 2017-08-02

Natural gas production in northern Canada decreased by more than 90% from 2003 to 2016. Northern gas production accounted for 0.6% of Canada’s total natural gas production in 2003, but fell to 0.1% of Canadian production in 2016. Lower natural gas prices, combined with high production costs relative to other North American producers, drove this production decline.

Remote locations, long distances, harsh weather, and shorter operation windows due to limited wintertime road access contribute to the higher cost of northern gas production. Despite these challenges, higher historic natural gas prices facilitated 94.5 million cubic feet per day (MMcf/d) of gas production in 2003. As gas prices gradually declined in subsequent years, northern production fell to 7.8 MMcf/d in 2016. Since March 2015, natural gas has only been produced at the Norman Wells and Ikhil fields of the Northwest Territories.Footnote 1 Yukon produced natural gas in the past but no longer does so. There is no natural gas production in Nunavut.

Source and Description

Source: NEB

Description: This stacked area chart shows natural gas produced in northern Canada from 2003 to 2016. Overall gas production in northern Canada exceeded 100 MMcf/d in some months in 2003 before steadily declining to around 6.5 MMcf/d as of December 2016. This production is further broken down into the following fields: Kotaneelee, Norman Wells, Ikhil, Fort Liard, and Cameron. All of these fields are in the Northwest Territories except for Kotaneelee, Yukon (there was no production in Nunavut). In January 2003, Kotaneelee produced about 24 MMcf/d but steadily decreased until production stopped in October 2012. Since 2003, Norman Wells production has ranged between approximately 3 MMcf/d and 16 MMcf/d. In January 2003, Ikhil produced about 2 MMcf/d, which decreased to 0.4 MMcf/d in December 2016. Fort Liard had production around 50 MMcf/d in 2003, but this decreased until production stopped in January 2008. Cameron Hills production was around 11 MMcf/d in January 2003 and steadily declined until production stopped in March 2015.

A superimposed line chart shows the monthly Alberta NIT natural gas price in Canadian dollars per gigajoule (GJ). From 2003 to 2009, gas prices fluctuated around six dollars per GJ, with spikes above $11 per GJ and a low below $4 per GJ. From 2009 to 2016, gas prices fluctuated around three dollars per GJ, with spikes above $5 per GJ and a downward spike below $1 per GJ during 2016.

The north contains about one third of Canada's remaining oil and natural gas resources, but development of these resources is uncertain. The Liard Basin is Canada’s second largest known gas resource. Production in the Northwest Territories portion of this basin began in 2000 and was delivered to markets in Alberta and British Columbia, but ceased in 2008 when low gas prices made this production uneconomic. The Mackenzie Gas Project (MGP), a proposed pipeline that would take natural gas from the Mackenzie Delta north of Inuvik into Alberta, received regulatory approval in 2011 but has not been built due to changing market conditions.

Map of Natural Gas Production and Gas Pipelines in Northern Canada

Source and Description

Source: NEB

Description: This map displays natural gas production in the Northwest Territories (NT), Yukon (YT), northern British Columbia (BC), and northern Alberta (AB). It shows the Ikhil field in the Mackenzie Delta at the northwest tip of NT, the Norman Wells field in the Mackenzie Plain of central NT, and the Kotaneelee and Ft Liard fields in the Liard Basin straddling the BC, NT, and YK borders. The Cameron Hills Field on the NT and AB border is also shown. Of these fields, only the ones in the Liard Basin are connected by NEB-regulated pipelines to northern AB and BC. The proposed Mackenzie Valley Gas Pipeline, which would potentially connect the Mackenzie Delta, the Mackenzie Plain, and northern AB is also shown on the map.

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