Why the natural gas prices still have to see a boost after starting LNG Canada

There were high expectations of the startup of LNG Canada that the project would offer an important boost for weak Canadian natural gas prices by opening access to markets in Asia.

So far, at least a prices still have to be delivered.

LNG Canada started with exporting freight On Canada Day this year. Last month, the average Alberta benchmark price for natural gas was the lowest that it is according to the month of July since 1985, according to RBN Energy.

The project is considered the largest investments in the private sector in Canadian history and expects to increase the GDP of the country by 0.4 percent As soon as it is fully in use. The first phase of the project is set to export liquid natural gas or LNG from two processing units, known as “trains”, with a total capacity of 14 million tonnes per year, LNG Canada said in a press release on 1 July.

But according to Jeremy McCrea, director of Energy Research at BMO Capital Markets: “There was a wrong alignment of the expectations of when [LNG Canada] would be fully performed. “

“Producers yielded more gas than what was expected here versus the question we would see,” said McCrea.

“As a result, we have an overbid Bassin here, while LNG Canada continues to rise.”

Prices immersed in 2024

The roots of the situation date further than just this summer.

In 2024, prices for Canadian natural gas will be one 40 years lowAccording to Statistics Canada. The agency says that the production, especially in BC, is raised online pending the LNG Canada Project. This led to a supply, a situation that was deteriorated by warm weather in North America, which led to a lower commercial and residential demand for natural gas.

Weaker than expected prizes for natural gas in recent months are also linked to maintenance of pipelines that move natural gas from the Western Canadian basin.

During their recent profit calls, both Tourmaline oil And Arc sources Is pointed to pipeline maintenance as a short -term button point for prices. The companies said that the situation should improve in the second half of the year, at what point the rise of LNG Canada should also continue.

In a statement to CBC News, a spokesperson for LNG Canada said that the first activities started with Train 1, and that production will continue to rise if the train starts 2 and involves a regular shipping cadence.

At that moment the statement said: “We expect that we will load one export freight from our facility every two days.”

As soon as LNG Canada works on full steam, according to a recent RBC nut, it will use around 15 export tankers per month to investors. So far, three export ships sailed from the facility in July and seven are expected to sail in August, according to the memorandum.

Take the income of the government

In a sense, persistently cheap prices for Canadian natural gas may have been a good thing for consumers by taking some pressure from utility accounts, said Heather Exner-Pirot, director of energy, natural resources and the environment with the MacDonald-Laurier Institute.

But she noticed the longer that prices stay low, the greater the hit for government revenues in provinces such as BC and Alberta, which count on royalties of natural resources.

In a statement, a spokesperson for the BC government said that its royalty income of natural gas in the financial year 2024-2025 fell by $ 82 million in comparison with Budget 2024 due to lower prices for natural gas, and reduced royalty rates applied to new wells.

A spokesperson for the provincial government of Alberta said it is too early to weigh the impact of oil and gas prices for this year, but that it is planning to give a tax update of the first quarter at the end of the month.

In July, the average benchmark price for Canadian natural gas in Canadian dollars was $ 0.76 per Gigajoule (GJ), according to RBN Energy. From August 13, Prices this month varied From less than $ 0.40 per GJ to just over $ 0.90 per GJ.

McCrea, with BMO, said it is unlikely that an abundance of natural gas will remain a problem the following year, in which producers already have one More careful approach Compared to the record production of 2024.

Exner-Pirot said that by 2026 she also expected a more balanced situation, although she noticed that the nature of raw material prices is that predictions can often be proven incorrectly.

‘I would do that [have thought] That we would already see several prizes than we see now, “said Exner-Pirot.” So, my crystal ball is broken. “