January 23, 2022

A bright future is predicted for the Canadian gas sector due to the problems of oil production in the USA

A bright future is predicted for the Canadian gas sector due to the problems of oil production in the USAA bright future is predicted for the Canadian gas sector due to the problems of oil production in the USA

Canadian natural gas producers are recovering faster from the pandemic than US shale companies, allowing net gas exports to the US to increase for the first time in five years.

The opportunity for Canadian companies to take market share from their American competitors is redefining an established trend in the energy sector of the last decade, when American shale drillers brought to market a large volume of cheap gas, which was mostly a by-product of drilling, displacing their Canadian counterparts from their only export market..

Canadian production is gaining momentum, driven by improved access to pipelines and declining activities of US crude oil producers. Production in Canada is projected to continue to grow as coal-fired power plants are decommissioned and the first LNG plant is expected to launch..

2020 hits oil and gas producers across North America hard. Canadian gas companies are now returning their rigs and are planning to increase capital expenditures this year for the first time since 2014..

The number of installations in Canada has grown from 9 to 76 units. There are 90 of them in the USA.

«What we see as the driving force behind the increase in expected capital expenditures for 2021 is that Canadian natural gas producers will grab market share through reduced by-product gas due to slowdown in drilling and production at a number of large US shale sources.», – said Tim McMillan, Executive Director of the Canadian Association of Petroleum Producers (CAPP).

Net Canadian gas exports jumped 31% year-on-year to 6.3 Bcfd in January, the highest since March 2018, according to Refinitiv data..

After falling to a 30-year low in 2020, Goldman Sachs estimates that exports to the United States could grow by as much as 29% to average 5.8 billion cubic meters per year.. This will be the first increase since 2016.

Canadian gas exports to the United States have been declining since 2002, especially after the shale boom in the last decade has provided the segment with a large amount of available gas, depriving Canadian exporters of a significant market share in the Midwest and East of Canada.

Gas production in Canada is expected to grow by 0.5 billion cubic meters. m this year to approximately 15.9 billion cubic meters. m, according to S&P Global Platts Analytics.

Canadian oil and gas producers forecast a 14% increase in spending, according to CAPP, with gas companies accounting for most of this increase.

Cenovus Energy Inc, Canada’s third largest oil and gas company, has committed approximately CAD 65 million to increase drilling starting in the third quarter.

Segment Leader Canadian Natural Resources Ltd said it intends to increase natural gas production by 11% this year.

In addition to falling supply in America, Canadian manufacturers are looking to capitalize on increased demand as US consumption and exports are forecast to hit record highs this year..

US gas consumption, which includes a projected 19% growth in liquefied natural gas (LNG) and pipeline exports, is expected to increase by about 1% in 2021.

This imbalance leads to higher prices. Henry Hub futures are at $ 3 per mm / BTU, which represents a nearly 50 percent increase from the 2020 average of $ 2.03.

To be sure, Canada’s economic recovery is still in its early stages.

Recent mergers and acquisitions in the oil shale industry may also contain costs.

ARC Resources Ltd said Wednesday it will buy Seven Generations Energy.

ARC Executive Director Terry Anderson said the combined company will primarily focus on paying off debts, but will aim to expand production next year.

In the long term, Canadian gas companies are expected to benefit from the phase-out of coal-fired power plants and the country‘s first LNG export terminal, which is expected to be completed by 2025..

Wood Mackenzie said it sees this year as the beginning of a new era of growth in gas production and predicts that Canadian gas exports will grow to about 9 billion cubic meters per year by 2030..

«2021 will be a springboard for the national gas sector», – said analyst Wood Mackenzie Dulles Wang.