May 3 –
The start-up of LNG Canada, the country’s first export terminal, risks weighing on the supply of natural gas for several years and forcing producers to reduce their exports to the United States, where demand for this fuel is reaching peaks, according to companies.
Shell-led LNG Canada has begun testing its C$40 billion British Columbia terminal with a view to commercial operation from mid-2025. The terminal will process up to 2 billion cubic feet per day (bcfd), or 11% of current Canadian gas production.
Like Canada, the United States is building more liquefied natural gas (LNG) terminals because it produces more gas than it consumes. However, even as the world’s largest gas producer, the United States is not drilling enough to meet both its domestic consumption and growing export demand.
Western Canadian producers have still been able to increase their average production by 0.5 billion cubic feet per year, indicating a temporary supply gap for the U.S. and Eastern markets of Canada as LNG Canada begins full operations, Jamie Heard, vice-president of capital markets at Tourmaline Oil, Canada’s largest gas producer, told Reuters.
This estimate is based on new capacity, not annual fluctuations due to outages.
“We believe it will take up to four years to meet the demand for Canadian LNG on the market,” said Mr. Heard.
Canada exported about 8 billion cubic feet of gas via pipeline to the United States in 2023, compared to an average of 7.5 billion cubic feet over the previous five years, according to the U.S. National Energy Information Administration. ‘energy.
ARC Resources, Canada’s third-largest gas producer, expects periods of decline in Canadian exports to the United States when supply and demand are not matched, but these periods are expected to be short-lived as the market is rebalancing, CEO Terry Anderson said in an email.
Satisfying demand depends on how prices compare across global gas hubs and spreads appear more volatile, he added.
ARC will supply gas to the Cedar LNG project, one of several projects located on British Columbia’s Pacific coast, close to Canada’s vast Montney shale field and a short distance from Asian markets.
Cedar is expected to receive the final investment decision mid-year to build a plant using 0.4 billion cubic feet of gas after opening in 2028 and Woodfibre LNG will use 0.29 billion cubic feet of gas after its completion in 2027.
LNG Canada, of which Petronas (Malaysia) owns 25%, is considering a second phase of 2 billion cubic feet per day, while Ksi Lisims LNG is seeking government approval for what would be the country’s second-largest terminal, requiring an additional 1.7 to 2 billion cubic feet per day.
“The start-up of LNG Canada opens up new markets for Canadian gas, other than the top 48 U.S. states… Any slowdown in the volume of Canadian gas exports to the United States could ripple across America as a whole North over the decade,” said Eli Rubin, senior energy analyst at consultancy EBW Analytics Group.
In the short term, however, Mr. Rubin believes that LNG Canada will help absorb “the current enormous surplus of stored gas” in Canada and the United States.
After a mild winter, gas prices in North America are currently low and supply high.
Canada, the world’s fifth-largest gas producer, extracted a record 18.8 billion cubic feet of gas in December, according to the most recent data from the Canadian energy regulator.
Longer term, overly exuberant drillers could produce too much gas, said Mark Oberstoetter, an analyst at Wood Mackenzie, adding that the consultancy expects Canadian gas production to reach 25 billion cubic feet per day in the mid-to-late 1990s. 2030.
Infrastructure, particularly raw natural gas processing facilities, must expand to enable greater Canadian production.
Tourmaline’s Mr Heard said his company and ARC were increasing their processing capacity, but the new plants needed by the industry were not yet all under construction.
Export pipeline capacity may also be a constraint on production growth because much of those pipelines are fully contracted for years to come, ARC’s Anderson said.
Despite this, concerns about a future increase in demand are welcome for an industry currently struggling with surpluses.
“After the current season where supply seems to be oversupplied, we find ourselves facing a very interesting market,” declared Jean-Paul Lachance, CEO of Peyto Exploration and Development.
