Canadian Gas Prospects Brighter
There are signs that Canadian gas prospects might be a bit brighter later this summer than many first thought, a leading industry analyst said in a May 22 research note.
Martin King, director of institutional research at investment bank GMP FirstEnergy, said in his latest Weekly Canadian Natural Gas Supplement that the pending round of maintenance on TransCanada’s Nova Gas Transmission Limited (NGTL) system in Alberta is likely to be the heaviest of the summer season, lasting until June 20.
“After that point, the maintenance schedule looks to be more tame and should lead to more frequent episodes of reduced or no restrictions on gas flows in Alberta,” King said.
Following the latest round of maintenance work in April and May, AECO prices responded “nicely” to fuller flows on the TransCanada-NGTL system, averaging very close to C$1.92/’000 ft3 (about US$1.53/mn Btu) – very much in line with GMP FirstEnergy’s “muddle through” price forecast for AECO this summer.
Beginning in the second half of June, King said “there should be, fingers crossed, a solid and more sustained upswing” in prices.
“We think current forward AECO prices for June to October 2018 averaging just C$1.12/’000 ft3 may be understating actual price outcomes by perhaps as much as C$1/’000 ft3,” King added. “With Alberta storage levels seeing one of the slowest increases since 1995 and storage levels progressively lagging year ago levels more and more, there should be solid price relief coming on the desire to inject gas into storage, creating an increasingly better bid as the market moves through June and July.”
Western Canadian storage injections in May this year are forecast at around 17.6bn ft3, the research note revealed, well below May 2017 injections that totalled more than 33bn ft3.
Helping support an AECO price recovery, the research note said, is a demand picture that is stronger year-to-date than at this time last year, with no reason to believe there might be any slippage given improved demand from the power generation and oil sands sectors.
“So far this injection season, Alberta gas demand is averaging 580mn ft3/day higher than in 2017, a remarkable gain of around 13%, and very much in line with our forecast gain for the year of 500mn ft3/day,” King said.
And injection season exports of Alberta gas to the US, he added, are also more robust than in the recent past, averaging about 500mn ft3/day higher than a year ago and “creating another outlet for increased supplies from western Canada.”