Canadian Natural Gas

From Wellhead to Burner Tip: How the

Canadian Natural Gas Industry is Structured
From Wellhead To Burner Tip
How the Canadian Natural Gas Industry is Structured
Canada is the world’s third largest natural gas producer. The state-of-the-art facilities operated by each
part of the full Canadian natural gas industry value chain are located in every region of the country.
The Canadian natural gas industry operates in the three main types of business, often referred to
as upstream, midstream and downstream. While the three “streams” are distinct – with unique
requirements, regulations, and technologies – they are fully interconnected and share the common
purpose of reliably and safely delivering clean, efficient Canadian natural gas to the market for a
variety of uses.

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At the Ground Level: Resource Development
Natural gas resource
development begins with an
analysis of the local geology.
Geologists map out the layers
of underground rocks (many
hundreds or thousands of
metres deep) to identify where
natural gas-bearing formations
might be located. They use
models of modern geography
but apply them to identify
features that existed million
of years ago and are now
thousands of feet underground.
For example, geologists know
that ancient seas had shorelines
and rivers flowing into them and
they build their underground
geological interpretations based
on this knowledge.
Geologists also work closely
with geophysicists to conduct
seismic surveys to refine
their interpretation of the
subsurface geology. These
seismic surveys are carefully
planned and executed to
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minimize disturbances to
the environment and limit
impacts on wildlife and habitat.
Reservoirs are assessed using
2- or 3-dimensional seismic
imaging, which is conducted
by capturing the returning
sound waves (which reflect
off subsurface rock layers)
induced by a controlled source
of seismic energy emitted on
the surface (small explosive
charge or seismic vibrator).
The gas sector is constantly
assessing and adopting new
technologies to improve the
efficiency, effectiveness and
environmental footprint of its
work.
When the prospective areas
have been identified, it is
necessary for exploration
and production companies to
acquire surface leases and
mineral rights. These companies
negotiate land lease deals with
land owners and acquire mineral
rights from the appropriate
government jurisdiction, since
in most areas surface land
owners do not have legal
ownership of the resources
located under their lands.
The industry is also subject
to comprehensive regulations
and requirements that are
designed to maximize public
safety during the exploration
for, and production of, oil and
gas resources and ensure that
these operations conform to
existing environmental laws and
that affected stakeholders have
been consulted.
Under the Constitution of
Canada, the majority of mineral
rights in Canada are owned
and administered by provincial
governments, although the
federal government has
ownership and jurisdiction over
federal Crown lands, such as
frontier oil and gas resources in
the north and offshore. In some
cases these are administered
in cooperation with provincial
and territorial governments. It
is also the federal government
that administers freehold rights
on treaty lands, on behalf of
various aboriginal groups.
With the acquisition of surface
leases and mineral rights and
with regulatory permits and
approvals in place to explore
for gas, companies can begin
drilling operations.
Buried Treasure: Natural Gas Production
Until the mid 1990s, natural
gas wells in Canada were
typically drilled vertically to
recover conventional gas: these
wellbores were drilled straight
into a reservoir, and then the
process was repeated for each
adjacent geographic area.
Technological innovation has
made it possible to create
horizontal wellbores, which are
increasingly used to recover
conventional, and especially,
unconventional gas. The wells
usually start out vertically,
but the drill bit is gradually
“steered” into a horizontal
position many hundreds of
meters under the surface. The
two significant advantages
of horizontal drilling are the
opportunities it has created for
the recovery of unconventional
natural gas and for noticeably
reducing the land footprint
required to produce the gas.
Horizontal drilling consolidates
many wells into one location,
leading to fewer well pads,
roads, pipelines, and surface
facilities.
Conventional gas is typically
“free gas” trapped in multiple,
relatively small, porous zones in
various naturally occurring rock
formations such as carbonates,
sandstones, and siltstones.
Exploration for conventional gas
has been almost the sole focus
of the oil and gas industry since
it began nearly 100 years ago.
However, most of the growth in
supply from today’s recoverable
gas resources is found in
unconventional formations. The
technological breakthroughs in
horizontal drilling and fracturing
that have made shale and other
What is Fracturing?
Hydraulic fracturing (also
called “fraccing”) is the
process of pumping a fluid
or a gas down a well, many
hundreds or thousands of
metres below ground, to a
depth considered appropriate
for natural gas production. The
pressure this creates causes
the surrounding rock to crack,
or fracture. A fluid (usually
water with some additives)
holding a suspended proppant
(usually sand) then flows into
the cracks. When the pumping
pressure is relieved, the water
disperses leaving a thin layer
of the sand to prop open the
cracks. This layer acts as a
conduit to allow the natural
gas to escape from tight (low
permeability) formations and
flow to the well so that it can
be recovered.
Fracturing has been in use with
both vertical and horizontal
wells in Canada since the
1950s, meaning that there is a
significant body of experience
and study related to its use.
The technology is carefully
used and managed to prevent
environmental impact,
particularly on groundwater.
3
 2010
2000

390 TCF*
70 years of supply
700-1300 TCF*
100+ years of supply

Existing Conventional (WCSB) Produced Offshore Coast Northern Coalbed Methane Tight Gas Shale Gas

Technology has greatly expanded Canada’s natural gas resource base,

which is constantly being re-assessed as new technology economically
unlocks new resources. Source: CSUG.

unconventional gas supplies known as “methane called potable groundwater).

commercially viable have adsorption.” Horizontal drilling,
revolutionized Canada’s natural combined with a process
gas supply picture. known as hydraulic fracturing,
is especially important in
unconventional gas recovery
because it enables the natural
Horizontal drilling
noticeably reduces gas to be detached from the
Fact: the land footprint
required to produce
surrounding rock formations and
brought to the surface.
natural gas.
Wellbores are carefully
constructed to efficiently
In unconventional reservoirs, recover gas while protecting
dense layers of gas molecules the surrounding environment,
are literally attached to organic particularly underground
rock fragments by a mechanism drinking water (most often
A well bore is drilled to allow
a narrow pipe to be sunk
deep into the ground. This
pipe is surrounded in the
bore hole with cement to
ensure that both the pipe
and the underground area it
travels through are completely
separated. At the production
site, deep underground and
several hundred meters below
the water table, the production
pipe is perforated to allow the
natural gas to flow into the pipe
and rise up to the surface.

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In the Pipeline: Natural Gas Goes to Market
Before the 1950s, Canadian
natural gas was a local
resource, transported and
used in areas that were close
to production sites. In 1957,
the Westcoast Pipeline (in
use today by Spectra Energy
Corp.) began carrying gas from
northeast British Columbia
to the U.S. border. Later that
same year, TransCanada began
operating its Alberta System
(known as AGTL or NOVA), and
also started construction of the
TransCanada Pipeline to carry
natural gas to Central Canada,
which was completed in 1958.
The transformational nature
of a cross-country natural
gas pipeline launched a
period of infrastructure
investment that has resulted
in today’s widespread national
and international pipeline
transmission and distribution
network. This system features
an underground network of
almost 480,000 km of pipeline,
ranging in diameter from
one-metre (or more) central
pipelines flowing compressed
gas across Canada’s vast terrain
to three-centimetre pipes that
flow gas at low pressure into
more than six million Canadian
homes and businesses. The
National Energy Board generally
regulates Canadian pipelines
that cross multiple jurisdictions,
with provincial regulators having
jurisdiction over intra-provincial
transportation and Local
Distribution Companies (LDCs).
Natural gas has to be pushed
along the pipeline by taking
advantage of methane’s
natural physical properties. By
compressing the gas and then
letting it flow from an area of
higher pressure to an area of
lower pressure and repeating
the process at intervals,
Canada’s gas companies
move about 16 billion cubic
feet of natural gas each day,
approximately half of which is
used by Canadian consumers.
Depending on demand and the
season, the remaining gas is
either stored for future use, or
exported to the United States. A
much smaller fraction of the gas
is used by the transportation
network itself, to self-fuel the
pipeline compressors.
Canada also has an emerging
liquefied natural gas (LNG)
industry, with an LNG
production and export facility
proposed in British Columbia
and LNG import capacity now in
place in New Brunswick. LNG
is stored and transported in
specialized containers. LNG also
provides a solution for the local
storage of gas for use at times
of peak demand.
Pure Natural Gas
The raw natural gas that is
recovered at a well then
flows into small (5 to 15
cm) gathering pipelines for
transportation to a processing
facility. To be ready for
market, natural gas has to be
processed into pipeline-ready
dry gas in the form of purified
methane.
Gas processing plants range
in size from small, movable
compression facilities capable
of removing impurities and
water from gas, to larger
plants that remove sulphur,
carbon dioxide and natural gas
liquids (these are familiar and
valuable substances such as
ethane, butane and propane).
Almost all the removed sulphur
and natural gas liquids are
recovered and sold for other
commercial uses.
Natural gas may pass through
one or more processing facility
on its way to market. Once
the natural gas is “dry,” in its
pure methane state, it can be
compressed for transmission
along Canada’s pipeline
highway.
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 Ready and Waiting: The Importance of Natural Gas Storage
Whether natural gas is stored
in underground holding facilities
or transformed into LNG, the
storage of natural gas plays a
critical role in balancing North
American natural gas supply
and demand.
While production from natural
gas wells remains fairly
constant throughout a calendar
year, demand fluctuates
significantly between winter
temperatures fall. Total North
American storage capacity
equals almost two months of
average North American supply.
Canada has about one-fifth of
North American capacity. The
most common form of natural
gas storage is in depleted oil
and gas reservoirs. Examples
Canadian Storage Capacity by Province in 2007
350
of this type of storage can be
found close to production areas
in Alberta and close to end use
markets in Southern Ontario.
Natural gas can also be stored
in mined-out salt caverns and
old aquifers, or liquefied and
stored in tanks in the form of
LNG.

and summer. In Canada, 300

depending on the weather,
winter demand in the residential 250

and commercial sector can 200

surpass summer demand by up
to six times. 150

100
This large seasonal gap could
have quite an effect on price, 50

but this is addressed in part 0

by injecting natural gas into BC AB SK ON QC NB

storage in summer so that Bcf
it can be used later when

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Nothing Like It: The Unmatched Versatility of Natural Gas
“Now you’re cooking with
gas,” is an expression
synonymous with speed and
efficiency. Canadian natural
gas is a progressive, modern,
versatile source of energy. It
is truly remarkable that, after
more than a century of use in
Canada, natural gas continues
to be a key energy choice for
innovative, efficient, cleaner,
cost-effective technologies.
Increasingly popular uses of
natural gas include:
3 TRANSPORTATION
Compressed or liquefied
natural gas is an option for
fuelling heavy vehicles,
such as highway tractor
trailers and garbage
trucks. This reduces both
fuel costs and carbon
emissions. Natural gas is
also an efficient feedstock
for hydrogen production for
use in fuel cells.
3 SPACE AND WATER
HEATING
Advanced home heating
systems running at
efficiencies over 90% (and
often over 95%) maximize
the potential of natural
gas to offer economy and
environmental benefits.
Tankless water heaters
are another example of
the energy efficiency
natural gas technologies
offer today’s homeowner.
District energy and
combined heat and power
systems can provide
both distributed heat
and produced electricity
to local residences. The
excess energy produced
by combined heat and
power systems in local
industries can be used to
heat nearby buildings.
3 INDUSTRIAL
PROCESSES
Many of the energy-
intensive industries
operating in Canada today,
particularly in the natural
resources sector, rely on
natural gas to operate,
harnessing the instant-heat
and unique combustion
advantages of natural
gas. Using combined
heat and power systems
(CHP), many industries
can become net energy
producers.
3 ELECTRICITY
GENERATION
Natural gas is an efficient
source of electric power
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 and is a foundation fuel
Residential Space Heating by system type for an electricity system
looking to include more
intermittent renewable
generation sources
such as wind or solar.
With its low emissions
profile and ability to
be quickly responsive
to sudden changes in
electricity supply and
demand, natural gas
can easily partner with
wind and solar power to
1% Other (Coal & Propane) 2% Wood 4.1% Heat Pump meet the reliability and
7.2% Heating Oil 9.3% Dual Fuel System 28.6% Electric Baseboard environmental objectives
47.7% Natural Gas of the electricity grid.

Natural gas is the single largest source of energy for space heating in
Canada. Homeowners with access to natural gas enjoy the benefits of Canadian natural gas is already
efficiency, cost-effectiveness, safety, and reliability. delivered to over 6 million
customers nationwide. The
residential and commercial
sectors account for 42 per cent
Industrial Sector Natural Gas Use of consumption in Canada,
while the industrial and power
generation sectors account
for 58 per cent. There is ample
supply in Canada to permit
more users to enjoy the
many benefits of natural gas,
particularly as infrastructure
development continues to
provide natural gas wherever it
is needed.

For more information:

34% Mining & Oil & Gas Extraction 7% Iron & Steel 34% All Other Manufacturing
Paula Dunlop,
4% Refined Petroleum Products 2% Construction 11% Chemicals & Fertilizers Director, Communications,
6% Pulp & Pulp Manufacturing 2% Aluminum & Non Ferrous Metals Canadian Gas Association
613-748-0057, ext 341
Natural gas powers Canada’s industries, with 58% of all gas used in
pdunlop@cga.ca
Canada fuelling industrial processes.

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Canadian Natural Gas is a made-in-Canada advocacy project sponsored by the following associations:

Canadian Energy Pipeline Association

Association canadienne de pipelines d’énergie

Please recycle.

© 2010 Canadian Natural Gas.