Gas exports vital for Canada

North America’s natural gas glut and a strengthening Canadian dollar translate into a tough year ahead for Canadian producers.

Calgary-based AJM Petroleum Consultants says the outlook is so discouraging that the development of alternative export markets for Western Canadian hydrocarbons is even more urgently needed.

But so far the only hope is that a joint venture by Apache Canada and EOG Resources Canada will gain National Energy Board approval and proceed with plans for the Kitimat LNG project to deliver Canadian gas to Asian markets.

AJM economist Ralph Glass said that Canadian gas can only compete with United States prices if it can sell for less.

“A high Canadian dollar and an increased supply of gas from American shale plays, combined with the U.S. economic recovery strategy to ‘keep America working,’ is pushing Canadian gas out of the U.S. markets,” he said.

“We have to maintain bargain basement prices to keep natural gas moving (into the U.S.) until we develop viable alternative markets.”

Glass said that signs of an early economic rebound in the U.S. should see the U.S. dollar regain some of its lost ground “and reduce the speculation that is driving current price premiums.”

In its quarterly domestic oil and gas price forecast, AJM is holding the line for the AECO trading hub in Alberta at C$4.10 per thousand cubic feet for 2011, but has lowered its 2012 prediction to C$4.50 from the C$4.70 prediction in its third-quarter forecast. AJM is predicting a Nymex price of US$4.50 in 2011 and a long-term price of US$6.75 by 2022. It anticipates WTI crude prices of US$85 per barrel in 2011, US$87.50 in 2012 and US$88 in 2013.

—Gary Park