Better Late Than Never - Canada Finally Approves 2021 Expansion of NGTL's Gas Pipeline Network

The options for moving Western Canada’s natural gas supply out of the region are limited. This situation has become more acute in the past few years with the upswing in associated gas production from specific areas within the sprawling region, meaning that not all the takeaway pipelines are created equal in terms of being able to move this incremental gas supply to downstream markets. One pipeline system — TC Energy’s mammoth Nova Gas Transmission Ltd. (NGTL) network — is ideally located to help out, given that big parts of it run through the fastest-growing production areas. But it’s been running full and is increasingly constrained. Will the planned expansions to the NGTL system be enough? Today, we continue our series on the Western Canadian natural gas market with a look at TC Energy’s NGTL network, the largest and most geographically advantaged of the pipeline systems in the region.

Last summer, Alberta natural gas prices staged a remarkable turnaround from the dismal lows and extreme volatility experienced the prior three summers. The price rise is widely credited to a temporary gas flow mechanism put in place by the operator of Alberta’s gas pipeline grid to combat congestion and oversupply issues associated with construction and maintenance during the summer of 2020. However, this temporary mechanism was just that — temporary — and will not be reinstated this summer. Without it, there is concern among Western Canadian gas producers that the weakness and volatility in gas prices seen during past summers might return this year. With warmer weather on the horizon, today we consider these issues and the potential for renewed price weakness in the Alberta natural gas market this year.

We’ve seen this movie one too many times. Just when natural gas prices are rallying across the world to multi-year or historic highs, another monkey wrench gets thrown into the workings of the Western Canadian gas market, imploding its suite of price markers. Last week, gas prices in Western Canada collapsed to mere pennies and even went negative for a time due to an unfortunate combination of pipeline restrictions and record-high production — a situation that will cost the region’s gas industry billions if left unchecked. In today’s RBN blog, we examine the root cause of the latest price collapse and when a turnaround might be expected.