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Wildfires across Canada's Alberta province are shutting in natural gas production and hiking prices north of the border but so far have shown only limited impact on markets in the US.
At least 100 active wildfires in the heartland of Canada's oil and gas country have prompted the shut-in of gas processing plants and production in parts of the Montney, Duvernay, Deep Basin and Kaybob plays. At least seven operators including Cenovus Energy, Tourmaline Oil, Vermilion Energy, Paramount Resources, Kiwetinohk Energy, Pipestone Energy, and Crescent Point have also announced curtailments.
Production shut-ins, which started May 5, briefly cut receipts on TC Energy's Nova Gas Transmission Line by some 2.5 Bcf/d, or about 20%, according to earlier reporting by S&P Global Commodity Insights.
On May 10, receipts on the NGTL system were still down about 1.3 Bcf/d, according to Ian Archer, a Calgary-based natural gas analyst with S&P Global. Lower receipts on NGTL have been compensated in part by a recent drop in storage injections and an uptick in supply from British Columbia, Archer said.
From May 6-7, gas production in Canada slumped to about 15.8 Bcf/d, dropping about 2.6 Bcf/d, or roughly 14%, compared with the April average. Gas production has rebounded in the days since, climbing to an estimated 16.7 Bcf/d May 10, legacy PointLogic data from S&P Global Commodity Insights showed.
The drop in Canadian production fueled a surge in gas prices in Alberta and British Columbia in the trading week starting May 8. At Alberta's AECO hub, cash prices for the May 9 flow date settled at $2.54/MMBtu, up from an average $1.96 in the week prior. At Westcoast station 2, the spot prices jumped to $2.14/MMBtu for the May 9 flows, rising nearly 70 cents from the prior-week average.
Exports, US markets
The recent drop in Canadian gas production has put a damper on pipeline exports to the US recently.
On May 7, net flows to US markets dropped to just 3.9 Bcf/d, down from an average at nearly 5.2 Bcf/d in the two-week period leading up to the widespread outbreak of wildfires in western Canada. From May 8-9, flows had already rebounded to an average 4.6 Bcf/d, according to S&P Global data.
Not surprisingly, gas markets in the Pacific Northwest have taken the brunt of the recent drop in exports. In the week beginning May 8, flows to the PNW have averaged just under 3.4 Bcf/d – down from an average at nearly 3.8 Bcf/d in the two weeks prior. Earlier this month, pipeline exports to the Rockies and the Midwest also slumped but have largely recovered from over the past several days.
On May 8, gas prices across the Pacific Northwest and the Rockies surged, with the Northwest Canada border hub Sumas climbing 77 cents from the prior trading session to settle at $1.85/MMBtu. Prices at Stanfield, Oregon and PG&E Malin gained about 50 cents on the day to around $2. Farther east in the Rockies, spot prices were up about 40-45 cents.
From May 9-10, spot gas prices across the Rockies and West eased, falling to around $1.60-$1.70/MMBtu for the May 11 flow date, according to preliminary settlement data from S&P Global.
While gas prices south of the border have eased in recent trading, it remains unclear when shut-in gas production in Alberta will return, with circumstances likely highly dependent on weather.