Although Western Canada's natural gas production may still be suffering curtailments due to wildfires affecting parts of Alberta's and British Columbia's gas producing regions, these have eased of late, with production making gains of nearly 1 Bcf/d (~7%) in the past week. The production curtailments appeared to drive a sharp pullback in exports of natural gas to the U.S., but the real culprit has been weak pricing at several key U.S. import pricing hubs in relation to the Canadian benchmark of AECO and undermining the incentive to import Canadian gas. For example, the price differential between Malin, OR and AECO fell to pennies in recent days, with Canadian gas exports to the West Coast pulling back at the same time and acccounting for about half of the recent total export decline of 1.6 Bcf/d (~20%).
Featured Articles
Burning Down the House - Wildfires, Pipeline Maintenance Punish Western Canadian Gas Production
Western Canada’s natural gas production has been on a roll in the past couple of years, reaching a record 17.3 Bcf/d in 2022. Another year of strong growth was expected in 2023, but Mother Nature had other plans — as usual. First, a milder-than-average heating season left plenty of gas in storage, pushing natural gas prices lower across North America. Second, tinder-dry conditions in some of the best gas production areas in Alberta and British Columbia sparked what so far has been a very active wildfire season — and forced producers to curtail their gas output numerous times in May and June. From our early expectations for production growth of 1.2 to 1.4 Bcf/d this year, the impacts from wildfires and a healthy dose of pipeline maintenance has chopped our 2023 production growth outlook to just 0.4 Bcf/d. As we discuss in today’s RBN blog, this slowdown in growth is exactly the opposite of what’s needed to avoid a runup in prices. Strong production momentum will be required into 2024 and 2025 to deal with the startup of the LNG Canada export facility, ongoing Canadian gas demand growth and pipeline exports to the U.S.
Money, Money, Money - Canadian Gas Producers Pivoting Toward Greater LNG Price Exposure
For the past several years, Western Canada’s natural gas producers have been forced to sit on the sidelines of too many broader price rallies as their main benchmark, AECO, languished at painfully low levels. Though an increasing number of producers have been steadily diversifying their price exposure away from Western Canada and AECO, even greater pricing upside might be captured if marketing arrangements could be developed to access higher international LNG prices via U.S. Gulf Coast terminals. In today’s RBN blog, we look at the steps that two of Canada’s largest natural gas producers have taken to capture that LNG price upside.
Closing Time - Bakken Gas Supplies Plunge as Oil Production Pulls Back
The collapse in crude oil prices that resulted from the Saudi-Russian price war in March — made only worse by the oil demand-depressing effects of COVID-19-related shelter-in-place orders — has begun to exact a toll on U.S. crude supplies. The Bakken, America’s #3 oil-producing basin, is a prime example of how quickly the price downturn has begun to negatively affect oil supplies as uneconomic wells there have been shut in and oil-focused drilling has ground to a near standstill. The spillover effects on the Bakken’s associated gas supplies have been just as dramatic with a sharp reduction seen since April as oil well shut-ins began to accelerate. The decline in these natural gas and NGL supplies to date provides a stark example of how quickly gas balances may be shifting in the region and may also be creating an opening for long-suffering Canadian gas exports. In today’s blog, we take a closer look at how Bakken oil supply declines are beginning to impact its gas supplies.
