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Canada's NEB sees growth in gas, renewables as provinces phase out coal

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Canada's NEB sees growth in gas, renewables as provinces phase out coal

Natural gas and hydroelectric power will backstop a range ofrenewable energy projects as Canada's provinces pivot from coal-firedgeneration to cleaner electricity sources, the nation's energy regulator said.

British Columbia, with its giant shale natural gas fields,will lead the nation in production growth of that fuel, the National EnergyBoard said May 11 in its energy outlook through 2040 for individual provinces. Theboard, known as the NEB, issued the forecasts for energy use as part of itsin-depth study of the future needs called Canada's Energy Future 2016.

Alberta, Saskatchewan and provinces in Atlantic Canada,which have traditionally relied on coal as a generating fuel, will shift toother sources of energy amid provincial and federal plans to reduce emissionswithin the next 15 years. In the West, much of the coal-fired generation willbe replaced by natural gas as drillers tap the prolific Montney and Duvernayshales. Gas-fired plants will provide backup for wind and solar facilities.Wind and hydropower will provide the bulk of power in Atlantic Canada, the NEBsaid.

"With the expected completion of the Muskrat Fallshydroelectric facility in the coming years, more than 98% of power generationin Newfoundland and Labrador will come from hydroelectricity," the NEBsaid in a statement. "Exports to neighboring provinces and the U.S. arealso expected to rise."

MuskratFalls, a giant 824-MW power plant on the lower Churchill River inLabrador, is being developed by province-owned The project hasbeen beset by cost overruns and delays and its projected start date of 2018 isin doubt. Still, the Emera Inc.-developedMaritime Link transmission network is expected to help power from Muskrat Fallsdisplace more-polluting electricity sources across the Atlantic provinces.

The NEB cautioned that British Columbia's gains in naturalgas output are contingent on development of giant LNG export plants on theprovince's northern coast. Although more than a dozen plants have been proposedand are still in the planning stages, investment decisions by large companieslike Royal Dutch Shell plcand Exxon Mobil Corp.have been deferred and other projects have been cancelled outright.

"The study shows that British Columbia leads thecountry in projected natural gas production growth," the NEB said. "However,the market price for natural gas and the issue of LNG exports are both keyuncertainties in the B.C. energy marketplace going forward."

Natural gas prices in western Canada have tanked amid a glutof the fuel and competition from U.S. shale development, which has displacedBritish Columbia and Alberta supplies in key Midwest and central Canadamarkets. While prices may get a lift in the future from increased electricityand LNG production, producers are currently shutting in unprofitable wells.Midstream company Keyera Corp.said it saw some processing volumes pared in the first quarter amid lowerprices.

The Calgary, Alberta-based company's processing business washurt "by the natural production declines plus drilling activitiessurrounding certain Keyera gas plants, and producers shutting in gas due to lowcommodity price environment, which we estimate at approximately 2% of our grossthroughput volume," Brad Lock, head of Keyera's gathering and processingunit, said on a May 11 earnings call. "We remain cautious with respect toour outlook for the remainder of 2016 given reduced producer capital budgetsand activity."

The NEB expects Canada's crude output to rise amid furtherdevelopment of the oil sands deposits in northeastern Alberta. Development ofpipelines to carry tar-like bitumen from the region to consuming nations willpartially determine growth in output.

"The study shows that Alberta's crude oil production isexpected to continue increasing into the future, led by oil sands growth,"the NEB said. "The speed of that growth will be determined by futureprices and infrastructure development."

Declines in natural gas production are also occurring offCanada's east coast, the NEB said. The Sable Offshore Energy Project and DeepPanuke field off the coast of Nova Scotia have seen production wane. The boardis more optimistic about possible increases in oil production from fields offNewfoundland and Labrador.

"Offshore natural gas production is expected to declinein lock-step with declines from Deep Panuke, though future discoveries anddevelopments remain a key uncertainty to energy supply and demand," theNEB said. "Offshore oil production is expected to rise in the medium term,though declines are anticipated between 2025 and 2030. Future discoveries anddevelopments are a key uncertainty to energy supply and demand going forward."

In central Canada, the nation's most-populous region thatincludes Ontario and Quebec, the NEB expects abundant hydro and nuclear outputwill continue to meet the bulk of electricity needs with renewables providinggrowth in power supplies. Slow demand growth will temper new power-generationneeds in Ontario.

"By 2040, Ontario is expected to add more than 11 GW ofnew capacity, primarily through wind, solar and natural gas generation,"the NEB said. "By that time frame, 28% of the total provincial supply willcome from renewable sources of wind, solar and biomass. Ontario's electricitydemand is expected to grow modestly in the same time period, but not reachingpeak levels seen in 2008, although future expansion of the province'sindustrial sector is a key uncertainty for electrical demand."

Quebec, with its abundant hydroelectric resources, isexpected to boost its output to support exports to the U.S. and neighboringprovinces, a key revenue source for its government.

"By 2040, Quebec is projected to add more than 6,000 MWof new wind and hydro capacity," the report said. "The province'selectricity exports are expected to remain strong, helped by a recentMemorandum of Understanding with Ontario to exchange electricity capacity.Quebec's end-use demand for energy is expected to grow only slightly, due todeclines in the transportation and residential sectors, offsetting small gainsin the commercial and industrial sectors. Demand remains below the 2007 peakthrough the projection period after Quebec's manufacturing sector facedsignificant contraction during the 2008 recession."