Natural Gas: Canada’s Paradise – Raw Materials

Demand for natural gas is skyrocketing and prices are skyrocketing, but there is a “happy island” (for buyers…) called AECO. AECO is uOne of the largest natural gas storage facilities in North America: Here is the reference price for it Canadian Gas Always here manufacturers are battling volatile prices, products changing hands at deep discounts; In August, the price of the center fell into negative territory even for a short period of time, but the situation did not improve over time, and these days some local companies such as Tourmaline Oil and Kelt Exploration have decided to temporarily cut production due to low prices.

Why are the prices so low?

Canadian producers have struggled with price volatility for years Reduced capacity of pipelines to transport gas from Alberta and British Columbia to North American markets, A problem worsens every summer when pipeline maintenance works reduce capacity. The The main system for gathering and transporting gas from Western Canada is the Nova Gas Transmission Line (TC Energy). 12.5 billion cubic feet per day, in 2021, approx 75% of Canadian gas production. During summer, increase in production, maintenance activities Nova gas transmission line and interruptions of some refineries gas They have created some kind of bottleneck in the infrastructure and this has determined Spot price decline. Since late August, prices have returned to trade at $3.5/mmbtu, but at a discount against prices Henry Hubb Over 5 dollars is too high.

What is the impact on producers?

Many Canadian producers have entered into forward contracts to hedge their risks or sell directly into other markets Dawn CenterIn Ontario. In a recent SNB research note titled “AECO limps,” analysts on average Only 15% of producers’ revenue is exposed to western Canadian prices, however, low prices cost the Alberta government loss of royalty revenue and discourage capital investment.

Who makes money?

Profit from this situation Consumers of gas and electricity in Western Canada hey Large industrial consumers such as oil sands companies and Alberta’s petrochemical industryWho can count on low costs especially because of low prices.

Can the regulator intervene?

Jean-Denis Charleboissenior officer CERHe explained that the agency is monitoring the situation but will not intervene in the absence of a direct request from the concerned parties. In 2019, when prices AECO Faced with a more prolonged decline, the regulator issued a regulation that allowed shippers to overstock gas And avoid selling too low. This protocol expires at the end of 2020. The CER It is willing to help improve the situation by asking for revised tariff proposals and holding special meetings aimed at improving communication between the parties involved.

What does TC Energy’s top management think?

TC energy, Owner of the company Nova gas transmission lineHe is responsible for the fall in prices AECO For abundant supply Western Canada and low efficiency of transport infrastructures and lThe solution is to build additional capacity for standard SLAs. CT It is on track to add 1.3 billion cubic feet per day of capacity by 2022, and another 2.2 billion between 2023 and 2026, but factors such as labor shortages, adverse weather, growing environmental requirements and regulatory delays are slowing operations.

Source Reuters

Diagrams with evidence GasAlberta Inc.