CALGARY, Alberta / NEW YORK, Oct. 25 (Reuters) – Demand for relatively inexpensive Canadian natural gas has surged, pushing exports to the United States to three-year highs and prompting Canadian producers to increase their spending on investment and their drilling activities.
Global natural gas prices have reached multi-year highs as global economies recover from last year’s slowdown during the pandemic. Today, natural gas stocks in Europe are dangerously low and demand in Asia is insatiable, so utilities around the world are competing for exports of liquefied natural gas (LNG).
Canadian gas is remote and prices at AECO’s hub in Alberta are among the cheapest in North America, with production far from major U.S. demand centers and LNG export terminals on the U.S. coast of North America. Gulf, some 2,500 miles (4,023 km). Canada does not have LNG export terminals.
Still, at around CA $ 5 ($ 4.12) per million British thermal units (mmBtu), AECO prices are well above their 2021 annual average of CA $ 3.38 ($ 2.73). , and some of Canada’s largest gas producers, including Tourmaline Oil Corp (TOU.TO) are looking to capitalize.
“A number of growers are ramping up their capital in the fourth quarter (fourth quarter) to add production volumes to the higher priced winter market,” said Matt Murphy, analyst at Tudor, Pickering, Holt & Co (TPH) in Calgary.
Gas receipts in TC Energy’s NGTL pipeline system (TRP.TO) hit an all-time high of 12.75 billion cubic feet per day (bcfd) in mid-October, according to TPH files from 2013 The NGTL system is the main maritime artery. Western Canadian gas to market and can be used as an indicator of regional production.
TPH forecasts further growth in gas receipts to 12.9 billion cubic feet per day in December, with new highs in 2022.
Data provider Refinitiv said Canadian exports to the United States have averaged 8.3 billion cubic feet per day since the start of the year, the highest during this period since 2018. In 2020, Canadian exports hit their lowest level since 1993 due to the pandemic, according to the US Energy Information Administration. The data.
The increase in drilling activity in Canada contrasts with a more cautious approach by U.S. gas producers, who remain cautious with their capital after the pandemic decimated demand in 2020 and left the industry on its knees.
The number of Canadian gas platforms is currently 70, up 75% from the same period last year, while U.S. gas platforms are up about 32% to 98 over the past year. the same period, according to energy services firm Baker Hughes Co (BKR.N).
Tourmaline, Canada’s largest gas producer, is ramping up drilling in the second half of the year and postponing capital spending originally planned for 2022 into this year, according to a presentation by the company in September.
“The company will monitor natural gas supply / demand balances and appropriately schedule new production starts over the winter and the rest of 2022,” said Tourmaline.
The company plans to produce an average of 500,000-510,000 barrels of oil equivalent next year, up from 440,000-445,000 in 2021.
Other major Canadian gas producers are increasing their activity, including Canadian Natural Resources Ltd (CNQ.TO) and ARC Resources (ARX.TO), according to industry analysts. The CRA declined to comment and CNRL did not respond to a request for comment.
However, a shortage of qualified crews to operate drilling rigs in Canada could limit the increase in gas production, and some producers remain cautious about the increase in supply which could dampen prices.
“How can we do more even if we wanted to do more? We’re at a limit on how many people we have,” said Darren Gee, managing director of Peyto Exploration and Development Corp (PEY.TO).
($ 1 = 1.2363 Canadian dollars)
Additional reporting by Rod Nickel in Winnipeg; Editing by David Gregorio
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