The Canadian natural gas industry: options and opportunities
Rinholm, Rodney Carl
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Recent and proposed changes within the Canadian gas industry have altered the business environment. The revised structure has had a major effect on the long range planning process for resource based firms. The goal of this thesis was to provide and demonstrate an effective planning methodology that can be used to analyze the future impacts of the present changes. In accomplishing this, an innovative computer modeling system has been used. The Generalized Equilibrium Modeling System (GEMS) is a state-of-the-art network modeling methodology that has been used to develop a North American regional natural gas model. This model distinguishes eighteen supply and nine demand regions in formulating an interactive representation of the North American gas market. The model provides the analytical capability to monitor the industry interactions for various policy alternatives over a forty five year time horizon. The North American regional gas model was applied in this thesis to analyze a number of current issues of concern to the Canadian natural gas industry. These include a long-range analysis of the consequences of moving to a free market business environment and an analysis of the recently implemented regional floor pricing system. Specific analysis for two series of policy cases was also done. The first examined the effects of changes to Canada's exportable surplus test while the second focused on the effects of a series of staged border taxes on Canadian gas exports. Throughout the analysis, specific regional effects, particularly related to Canadian exports, were also highlighted. The analysis results show that the outlook for the Canadian gas industry is extremely promising in terms of market volumes, revenues and profitability. Under all policies, the potential for significant increases in production is evident. The trend towards the free market business environment is of significant benefit to the welfare of both the industry and the country. Consistent with this, it was found that the national interest is best served by the relaxation of Canada's exportable surplus reserve test and by minimal price distinction between gas bound for export and domestic markets.