OTTAWA, March 22 /CNW Telbec/ - Higher average natural gas prices this year will more than offset falling production in Canada's natural gas extraction industry, boosting profits in 2010, according to The Conference Board of Canada's Canadian Industrial Outlook: Canada's Gas Extraction Industry - Winter 2010.
"Although prices have nearly doubled in less than six months, drilling activity remains sluggish as Canada continues to ride out the remaining effects of the recession," said Todd Crawford, Economist.
Due to high inventories, natural gas prices are expected to average $5.44 per thousand cubic feet, up 36 per cent from its low in 2009 but down from the 2008 average. Moderate prices will keep natural gas drilling activity weak this year, so production is expected to decline by 2 per cent. Industry production will continue to remain weak throughout the medium term as the initial productivity of wells declines, posing further challenges for the industry.
After falling by nearly 65 per cent last year, pre-tax profits in Canada's gas extraction industry are forecast to bounce back near 2008 levels, reaching close to $5.9 billion in 2010.
This forecast was completed before the Government of Alberta released the outcome of its Competitiveness Review. Changes to Alberta's royalty framework are expected to have little effect on this year's forecast. The reduction in royalties proposed by the Alberta government offers some upside potential to the forecast starting in 2011.
SOURCE Conference Board of Canada
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