Canadian gas exports fall in 2016 start – exports to America off by 56 per cent

FORT ST. JOHN, B.C. — Alberta Oil has published what could be viewed as a reality check story for those who don’t believe being part of the LNG supply chain to Asian markets could become the lifeline of Canadian natural gas producers.

The stated main reason is the development of the Marcellus shale play in Pennsylvania, and the story notes that, in the first two months of this year, Canadian gas exports into the U.S. were down 22 per cent, while exports to the hitherto main American market in the Northeast region of the country were off 56 per cent.

It’s a trend the U.S. Energy Information Administration expects will continue, but with a horizontal gas well in the area reportedly priced at around $4 – 5 million, it’s not the drilling in the Marcellus that’s the major competitive bargain when compared to the Montney play in this region.

The Appalachian Basin Play has the clear edge because of its close proximity, to so much of North America’s main consumer base, and with several more pipelines poised to become a factor in its pipeline takeaway capacity in the next 12 to 24 months, gas from the Western Canadian Basin is not only likely to get squeezed out of the U.S., but quite likely much of eastern Canada.

The story says most menacing of all, from the viewpoint of Western Canadian producers, are the pipeline expansion plans of companies like Enbridge, Nexus and Spectra — since when completed, by 2018, they could pipe into Ontario, as much as five billion cubic feet per day from the Marcellus.

There are widely varying estimates on the amount of technically recoverable natural gas there, but in 2011 the EIA reported the Marcellus Shale contained about 410 trillion cubic feet, close to the Montney estimate of 449 trillion.

What is clear, is this: by early last year, the Marcellus was the source of over 36 per cent of the shale gas produced in the U.S. and since the beginning of 2014 natural gas prices had fallen more than two-thirds, from $6/U.S. per British Thermal Unit, to less than $2 by the end of last year.

We’re on the back nine of an El Nino-driven winter with gas storage levels still high — the U.S. northeast is fully transitioned from a net importer to net exporter — the Marcellus is now a significant part of the international LNG development race, and five U.S. LNG terminals are already shipping overseas, and that’s why BC government leaders went to Ottawa this week, carrying their LNG starting pistol.