Natural gas supplies in Western Canada fell into a hole in 2019, registering their first decline in a half-dozen years. That drop was led by a supply pullback on TC Energy’s Nova Gas Transmission Limited (NGTL) system, the largest gas pipeline network in the region, as producers grappled with widespread pipeline maintenance, shrinking budgets, and wellhead shut-ins due to ultra-low prices, especially during the summer months. That supply hole is going to be fixed in the months ahead, thanks to a major pipeline expansion — the North Montney Mainline — that recently entered service with a direct connection into the NGTL system. With this new pipeline tapping deeper into the vast Montney formation in northeastern British Columbia, gas supplies are showing signs of pushing higher, and more upside is expected in the months ahead. Today, we examine the new pipe and what it means for gas supplies on NGTL.
Last year was not kind to Western Canadian natural gas producers. Constraints on TC Energy’s NGTL system, which moves about 80% of the gas supply in the region, created havoc for producers and contributed to record-low natural gas prices during the summer months. The rock-bottom prices also came at a time when investors were already applying greater pressure on gas producers to improve returns and live within cash flow. This toxic combination led to a reduction in gas supplies across the NGTL system as producers hunkered down, reduced drilling and spending, and shut-in uneconomic wells. As shown in Figure 1, the end result was a pullback in gas supplies marked by a reduction in NGTL supply flows in 2019 for the first time since 2013.
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