Producers in Western Canada are expanding output ahead of the country’s first major LNG project, pushing more natural gas into the US and adding to a market glut.
Eastbound flows out of the AECO hub in Alberta onto the TC Mainline have averaged 4.6 Bcf/d the past three months, up 0.7 Bcf/d vs the same period last year (see blue area in chart). The increase in Mainline flows is evidence of record marketable natural gas production from the Western Canadian Sedimentary Basin (WCSB), up 0.9 Bcf/d Y-O-Y as of December 2023, according to East Daley and CER data.
East Daley tracks the Western Canada market as part of our Macro Supply and Demand Forecast. The ramp in WCSB production is likely the result of producers front-running delivery ahead of the expected in-service of LNG Canada in early 2025. The start of the LNG export project in Kitimat, BC will add 1.8 Bcf/d of new demand once it reaches full capacity about 9-12 months after initial commissioning.
In addition to LNG Canada, producers in Western Canada saw relatively high prices last year. AECO basis averaged a very strong -$0.58/MMBtu in 2023, up from an average of -$1.20/MMBtu the previous three years (2020-22), helping encourage increased production.
The boost in Canadian flows adds to the oversupply situation in the US, as those volumes will need to find a short-term home in 2024. Flow patterns suggest shippers are seeking spare capacity, and the TC Mainline has plenty available to move supply. The increased eastbound flows on the Mainline will bring more gas to the Midwest and Dawn markets, which could face downward basis pressure this year.
Relief should come in 2025, when LNG Canada will draw AECO gas west via Coastal GasLink. The new pipeline was mechanically completed in November 2023, according to developer TC Energy (TRP). East Daley expects TC Mainline to see reduced throughput in 2025, acting as a buffer to assist in filling feedgas volumes as LNG Canada ramps up to full capacity. – Ryan Smith Tickers: TRP.
New EDA Product: West Coast Supply & Demand
The West Coast Supply & Demand report is your go-to resource for mastering the energy market from the California coast to the western Colorado Rockies. This dynamic product offers extensive regional coverage, precise production forecasts for key basins, and in-depth pricing analysis, specifically examining the Colorado pricing spread from CIG Mainline to NW Pipeline Rockies.
Stay ahead of the competition with strategic insights, ensuring you make informed decisions and capitalize on emerging opportunities. Elevate your business with unparalleled market intelligence – invest in the West Coast Supply & Demand report today.
New EDA Product: Houston Ship Channel Supply & Demand
The Houston Ship Channel Supply & Demand report allows users to dive deep in understanding, and monitoring Houston Ship Channel natural gas dynamics. The product contains monthly updates of relevant price spreads, pipeline flows, production and demand estimates affecting the South Texas market, with forecasts extending 5 years into the future. Learn more about the Houston Ship Channel Supply & Demand report.
Energy Data Studio
East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.
Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.
Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.
The Daley Note
Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.
