The opportunity for Canadian firms to take a piece of the market back from U.S. rivals reverses one of the dominant energy trends of the last decade, where U.S. shale drillers unleashed a flood of cheap plentiful gas – largely a byproduct of crude oil drilling – and pushed western Canadian producers out of their only export market.
Canadian drilling is picking up swiftly, spurred by better pipeline access and because U.S. producers have cut back crude output, and with it, the associated gas produced with that oil. Canada’s production is forecast to keep rising as coal-fired plants are retired and with the expected start-up of its first liquefied natural gas plant.
Oil and gas producers across North America endured a brutal 2020 as the pandemic crushed demand. The fall in Canada was furious, as companies cut gas rigs from 92 at the beginning of 2020 to just nine by June.
Now, Canadian gas companies are putting rigs back to work and have plans this year to increase capital spending for the first time since 2014.
Canada’s rig count has surged from nine to 76, while the U.S. gas rig count is at 90, up from a low of 68 in July, according to Baker Hughes data.
“What we believe is driving some of the increase in expected capital spending for 2021 is for Canadian natural gas producers to capture market share from the reduction in associated natural gas due to the slowdown of drilling and production in a number of the large U.S. shale basins,” said Tim McMillan, chief executive of the Canadian Association of Petroleum Producers (CAPP).
Net Canadian gas exports jumped by 31% year-on-year to 6.3 billion cubic feet per day (bcfd) in January, the most in a month since March 2018, according to data provider Refinitiv.
After plunging to a 30-year low in 2020, exports to the United States could rise as much as 29% to average 5.8 bcfd this year, Goldman Sachs estimates. That would be the first increase since 2016.
Canadian gas exports to the United States have been declining since 2002, particularly since last decade’s U.S. shale boom unlocked a plethora of cheap gas, robbing Canadian shippers of market share in the U.S. Midwest and eastern Canada.
(Reuters)
