Market Snapshot: Mid-size Producers play Increasingly Important Role in Western Canadian Natural Gas Market
Release date: 2015-09-23
The past decade, the number of natural gas producers operating in western Canada has fallen by 30 per cent, from 829 in 2006 to 619 in 2014. Despite this decline, there are more mid-size and large mid-size producers active in the western Canadian gas market, and their share of total production has increased.
Although major producers still dominate the market’s ‘operated production’,Footnote 1 the share of production provided by mid-size and large mid-size producers has grown significantly. The share of production held by majors declined from 58 per cent in 2006 to 46 per cent in 2014, while large mid-size producers increased their share from 24 per cent to 34 per cent. The combined share of production from the top 10 producers in western Canada declined from 55 per cent in 2006 to 52 per cent in 2014, with share provided by the market's largest producer remaining unchanged at 12 per cent.
Figure Sources and Data
Sources: Divestco, NEB calculations
Description: The above chart depicts the share of production from western Canadian natural gas producers in 2006 and 2014, organized by total operated production. The share of production provided by major producers fell by 12 per cent from 2006 to 2014 and was offset by increases in the shares of mid-size producers increasing by two per cent and large mid-size producers increasing by 10 per cent. The share of production by juniors remained flat, while marginal and small producers saw negligible shifts of less than one per cent.
| Producer Size | MMcf/d |
|---|---|
| Marginal | less than 1 |
| Small | 1 - 10 |
| Junior | 10 - 50 |
| Mid-size | 50 - 100 |
| Large Mid-size | 100 - 500 |
| Major | more than 500 |
Natural gas development requires large amounts of investment capital to fund complex and expensive drilling programs. Following the 2006 peak in production, gas prices fell and many smaller producers had difficulty attracting investment. Hundreds of marginal and small-size producers exited the market, along with a dozen juniors. Three major producers also sold their natural gas assets and exited the western Canadian market, leading to a decline in the share of production provided by majors. Mid-size and large mid-size producers increased their shares of production by drilling tight gas prospects on land acquired from majors, smaller producers, and provincial governments.
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