On the eve of Canada's first LNG export facility starting up, future growth is anything but certain
Business has been tough for a while now if your business is selling Canadian natural gas in North America.
Producers in Western Canada this summer endured the worst price slump in five years as a combination of warm weather and high storage volumes oversupplied the market, pushing AECO prices (the Canadian benchmark price for natural gas) below $1 per gigajoule during the shoulder season and spot prices into negative territory in August and September.
Through it all, companies have resolutely maintained production, sometimes to their own detriment, setting new daily production records in October and November even as the added volumes meant prices dropped further.
The blow from dismal natural gas prices has been softened by the steady returns for the byproducts of drilling, including natural gas liquids and condensate, but a feeling is emerging that sweet relief is on the way with the upcoming startup of the LNG Canada export facility in Kitimat, B.C.
LNG Canada will boost exports of natural gas from Western Canada by 20 per cent when it begins commercial operations in mid-2025, BMO Capital Markets analyst Randy Ollenberger recently told a room full of oilfield service contractors at an industry luncheon in Calgary.
“We think the outlook for natural gas in Western Canada is probably the best since 2005,” he said. “Because gas has really sucked since then and we think it’s going to be much better over the next couple of years here. We’ve got a very bullish outlook on that.”
The thesis beginning to grip the sector is that Canadian producers won’t be able to drill fast enough or ship in large enough volumes on existing pipeline routes to meet the combined pull on resources from Shell PLC-led LNG Canada and the demand from
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