Canadian natural gas producers are grappling with a significant oversupply as they prepare for the upcoming LNG Canada export terminal, which may struggle to elevate gas prices. Key points include:
Price Decline: Gas prices at Alberta’s AECO hub dropped to a two-year low of 5 Canadian cents per million British thermal units (mmBtu) due to overflowing storage.
Production Cuts: Producers have curtailed between 800 million and 1 billion cubic feet per day (bcf/d), approximately 5% of Canada’s total gas production, in response to low prices.
Delayed Drilling: Some companies, like Canadian Natural Resources Ltd, are postponing the completion of new wells until prices improve.
Temporary Curtailments: Advantage Energy announced it would shut in up to 130 million cubic feet a day of gas, highlighting disappointment over producers selling at a loss rather than curtailing production.
LNG Canada Facility: The LNG Canada terminal, set to open in mid-2025, will require around 2.1 bcf/d of gas, but analysts predict prices will only reach C$2.46 per gigajoule by September 2025, lower than earlier forecasts.
Market Stability: While LNG Canada is expected to stabilize the AECO market, current conditions indicate that gas prices may not see substantial increases, and a cold winter could further draw gas from storage, impacting prices.