In 2017, the U.S. Northeast sent more natural gas to Canada than it received, making the region a net exporter for the first time on an annual average basis. That marks another milestone in the ongoing flow reversal happening in the Northeast, led by the growth of local gas supply from the Marcellus/Utica shales. For now, the region still relies on Canadian gas during the highest winter demand months, but imports from Canada in all the other months are increasingly unnecessary as Northeast gas production balloons further. Today, we look at evolving dynamics at the U.S.-Canadian border in the Northeast.
This is Part 2 of a series updating our analysis of changing gas flows along the U.S.-Canada border, a topic we first covered in-depth in the Return To Sender blog series back in 2013. In Part 1 of this update series, we began with a macro view of total U.S. gas flows across the Canadian border. As we noted, Canadian gas production last year rebounded to the highest level in 10 years, spurred on by rising gas demand from gas-fired power generation, as well as the oil sands production in Alberta, which depends on large volumes of steam. At the same time, Canadian producers are facing ever-increasing competition from soaring U.S. gas supply, led by enormous growth in the Marcellus/Utica shales in the Northeast. Not only is that supply growth continuing to put the squeeze on any remaining inbound flows of supply to the Northeast from other regions, including Canada, but as inbound pipeline capacity is reversed and new capacity built (see our In a Northeast Minute series), it is increasingly overtaking market share of demand in other U.S. regions, as well as north of the border in Ontario, where gas-fired power generation demand has been growing.
As we described in Part 1 of this series, thus far, Canadian producers have been able to utilize the various export points along the border to shift flows from one region to another in order to more or less maintain net flows to the U.S. within a relatively stable range between 5.5 and 6.0 Bcf/d annually. But as new takeaway capacity allows Northeast gas supply to increasingly fulfill local needs and also extend its reach outside the region, Canada’s export options appear to be dwindling. It’s really the regional market dynamics in the U.S. that are driving that. In fact, if we look at border flows on a region level, they have changed dramatically — at some points more than others — as Canadian gas producers adapt to changing market dynamics on the U.S. side. So, next, we take a closer look at border flows by U.S. region, starting with the Northeast.
Historically, Canadian gas flowing to the U.S. Northeast has originated in Western Canada and been delivered to Eastern Canada on the TransCanada Pipeline (TCPL) system. The map below shows the major pipeline systems on both sides and border points at the Canadian border in the Northeast.