Canada Gas Output May Fall 2.7 Percent by 2010, Government Says

By Reg Curren

Oct. 23 (Bloomberg) -- Canada's natural-gas output will probably fall 2.7 percent by 2010 as higher costs and lower prices make it uneconomical to tap new reserves, a government report today showed.

Gas production will fall to 15.9 billion cubic feet a day by 2010 from a predicted 16.3 billion this year, the report from Canada's National Energy Board showed.

Prices for gas traded in New York have plunged 53 percent to $6.438 per million British thermal units from a 30-month high of $13.577 per million Btu reached in July. Gas dropped amid lower demand and increasing inventories. Canada accounts for about 25 percent of combined North American production, the board said.

``Under conditions of such extreme price volatility, future levels of natural gas investment are highly uncertain,'' the board said in its report.

Supplies in the U.S. have gained on new gas production from shale formations in Texas. Fuel use is slowing as a recession looms and a mild summer cut demand from utilities to produce electricity for air conditioners.

U.S. inventories reached 3.347 trillion cubic feet in the week ended Oct. 17, according a U.S. Energy Department supply report today.

The National Energy Board is an agency of Canada's federal government that oversees pipelines and energy exports. The board's duties are similar to those of the U.S. Federal Energy Regulatory Commission.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.