March 2, 2015 – Business News Network
Energy Watch: In drought-stricken California, a market for Canadian gas emerges
Robert Tuttle and Lynn Doan, Bloomberg
Driven out of their best U.S. markets by the shale boom, Canada’s gas producers are turning to the power- hungry West Coast.
Canadian gas shipments to Washington state are the highest seasonally since at least 2008, and exports through a border point in Eastport, Idaho, surged in November to a winter record, data compiled by Genscape Inc. show. Demand from California gas- fired power plants is increasing as a drought now in its fourth year cuts hydroelectric production.
A flood of low-cost Marcellus gas from Pennsylvania and West Virginia helped cut Canada’s shipments into the Midwest, its biggest export market, by 16 percent in the past three years, U.S. government data show. Liquefied natural gas export terminals in British Columbia have been delayed while Alberta’s oil sands companies, which burn gas to melt bitumen, curtailed expansion plans after crude prices plunged.
“Western Canadian gas producers have essentially no place for their gas to go in the near term except the Pacific Northwest, if local demand can’t take it,” Rick Smead, managing director of advisory services for RBN Energy LLC, a Houston- based consulting company, said in a phone interview. “Nothing will go east to speak of and the LNG projects seem to be pretty gridlocked.”
Alberta gas producers, who last year lost a decade-long price advantage of as much as $1.92 US per million British thermal units to gas from the U.S. Northeast, have found better prospects out West.
Western Canadian gas traded at an average discount of 83 cents per million British thermal units to the fuel in Northern California over the past year, according to price data compiled by Bloomberg.
