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Canada boosts U.S. natgas exports, drills more as global prices surge -Breaking


© Reuters. FILEPHOTO: A jack oil pumps in oil near Calgary, Alberta Canada, on July 21, 2014. REUTERS/Todd Korol

Scott DiSavino & Nia Williams

CALGARY, Alberta/NEW YORK – The demand for Canadian housing has risen, driving American exports to record highs. This has prompted Canadian producers to invest more capital and increase drilling activity.

As world economies rebound from the last year’s recession, global natural gas prices are at multi-year highs. The European natural gas supply is at dangerously low levels and the demand from Asia is insatiable. Utilities around the world compete to export liquefied gas (LNG).

Canada has a remote gas supply. Prices at Alberta’s AECO hub are some of the most affordable in North America. The AECO hub is located far away from U.S. demand centers or LNG export terminals on the U.S. Gulf Coast. Its production ranges between 2,500 and 4,023 kilometers. Canada has no LNG export terminals.

However, AECO prices remain at C$5 ($4.12) for every million British thermal units. This price is still well below their C$3.38 ($2.73) average in 2021. Some of Canada’s top gas producers, including Tourmaline Oil Corp., seek to capitalise.

“A number of producers are accelerating capital into Q4 (fourth quarter) to add production volumes into the higher-priced winter market,” said Matt Murphy, an analyst at Tudor, Pickering, Holt & Co (TPH) in Calgary.

TPH records from 2013 show that gas received into TC Energy’s NGTL pipe system reached an all-time record of 12.75 Bcfd in October. TPH records from 2013 show that the NGTL is the principal route to transport western Canadian natural gas to the market. It can also be used as a proxy of the area’s output.

TPH forecasts continued growth in gas receipts, reaching 12.9 billion cubic feet in December. New highs are expected in 2022.

Refinitiv, a data provider, reported that Canadian exports to America averaged 8.3 billion dollars per year. This is the most since 2018. According to U.S. Energy Information Administration data, Canadian exports fell to their lowest point since 1993 due the pandemic.

Canada’s increased drilling activity contrasts with the cautious attitude of U.S. producers who remain prudent with their capital following the 2020 pandemic that decimated the demand and put the industry in shambles.

Baker Hughes Co. energy services provider, reports that the Canadian gas number is 70. That’s 75% higher than it was last year. However, U.S. rig counts have gone up 32% to 98 in the same period.

According to Tourmaline Canada, Canada’s biggest gas producer is increasing drilling in the second quarter and making capital expenditures for this year that were originally scheduled for 2022, according to a September company presentation.

Tourmaline explained that Tourmaline will keep track of natural gas supply/demand balances to schedule production starts in a timely manner through winter 2022.

It expects to produce an average of 500,000-511,000 barrels per year next year. This is up from the 440,000-45,000 production in 2021.

Industry analysts stated that Canadian Natural Resources Ltd (NYSE:) and ARC Resources are two other major Canadian producers of natural gas. CNRL declined to respond and ARC did not comment.

However, Canada is short of drilling crews skilled enough to drive the rigs. This could impact how much production rises. Producers are cautious, however, that an increase in supply might limit prices.

“How can we accomplish more, even though we want to?” We are limited in the amount of people available,” said Darren Gee (CEO, Peyto Development and Exploration Corp.

($1 = 1.2363 Canadian dollars)