Nova pipeline system

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.

This year looks like it could be a better one for many Canadian natural gas producers. Like their brethren in the U.S., they have been forced in recent years to increasingly spend within — and even less than — cash flow as other sources of financing have dried up and investors have prioritized better returns over production volume growth. With Canadian gas producers having also faced some of the worst natural gas pricing conditions on record in 2019, far worse than those in the U.S., it is no wonder that Canadian natural gas supplies pulled back in 2019, marking the first down year for overall gas supplies since 2012. Despite what is likely still to be a cash flow and spending constrained environment in 2020, there is the potential for real upside for Western Canadian natural gas supplies this year, especially for the supply that flows into TC Energy’s Nova pipeline system. Today, we consider what may be setting the stage for gas supply gains on the Nova system in 2020 after a somewhat dismal 2019.