Western Canadian natural gas prices are recovering from their mid-2019 slump but will remain low and prone to fluctuation through 2024, according to TC Energy Corp.’s supply collection network in Alberta and British Columbia (BC).
An annual five-year plan by Nova Gas Transmission Ltd. (NGTL) forecasts only limited improvement into a range of C$1.67-2.67/gigajoule (GJ) ($1.32-2.10/MMBtu). NGTL earlier this month said Western Canadian gas would continue to face stiff competition from unconventional U.S. production.
The bottom of NGTL’s projected trading range beats mid-2019 lows, which generated a June average of US58 cents/MMBtu, according to Calgary’s GLJ Petroleum Consultants. Even the top of NGTL’s forecast price band would be well below the US$3.35-4.02/MMBtu that Western Canadian gas fetched 10 years ago.
NGTL’s modest expectations are the Canadian side of continent-wide change caused by supply increases from prolific shale production growth over the past decade due to horizontal drilling and hydraulic fracturing.
“Low-cost associated gas supplies from oil plays and liquids-rich gas plays are exerting more influence on North American prices,” said the TC subsidiary.
Nova Inventory Transfer, the NGTL yardstick, continues to price below Henry Hub “as traditional markets for Western Canadian supplies are challenged by short-term availability of egress capacity and competing basins.”
NGTL stands out as a barometer of industry conditions by carrying about three-quarters of total Canadian production across its 24,000-kilometer (14,400-mile) pipeline web. The network’s annual five-year service plans and forecasts are generated from deliveries, contract requests that prompt facilities additions and canvasses of shippers’ market expectations.
Along with limited price gains, the system is signaling changes in supply patterns. Deliveries across NGTL for markets beyond Western Canada are projected to grow by only 9% to an annual average of 7.2 Bcf/d as of 2024.
The majority of NGTL traffic growth over the next five years is expected to be a response to gas demand inside Canada. Delivery increases chiefly for Alberta thermal oilsands production and power generation are forecast to be 12%, reaching 6.9 Bcf/d in 2024.
Western Canadian supply sources continue to drive multibillion-dollar additions to NGTL facilities in an effort to adapt the pipeline grid to shale gas development, which is being led by the prolific Montney formation straddling BC and Alberta.
NGTL calls the Montney production region its Peace River Project Area and expects it to stay busy.
“The incremental shale gas and tight sandstone gas supply is expected to more than offset existing production declines, and will gradually increase system supply to nearly 14.2 Bcf/d in 2023-24,” according to NGTL’s five-year plan.
After swelling to 84% of flows across the NGTL network as of 2019, shipments originating in the Peace River Project Area are forecast to keep growing to 90% of the system’s gas supply as of 2024.