The United States and Canada work well together. The countries share the world’s largest and most comprehensive trade relationship, exchanging more than $2 billion per day in goods and services; the U.S. is Canada’s largest foreign investor and Canada is the third-largest foreign investor in the U.S. The partnership clearly isn’t broken, but it may need some mending as bilateral and international gas trade stands to complicate matters in short order.
As with most current global natural gas issues, we must first look back to the shale gas revolution. In 2005 – just as hydraulic fracturing was finding its feet in the Barnett shale – piped supplies from Canada met nearly 17 percent of total U.S. natural gas demand. By year’s end 2015 – with U.S. production some 50 percent higher – imports from Canada dipped below 10 percent of consumption.
For Canadian producers, rising U.S. production is just one of a series of issues in what is a multifaceted and evolving problem: they struggle to compete. Of course, the resulting, and thus far persistent low prices are another. Canadian natural gas deliverability has taken a large hit as prices have moved below the supply cost of most new natural gas developments. Total production dipped slightly in 2015, though Alberta and British Columbia (BC) provinces – the Montney and Duvernay shales – proved resilient.
Positioned mere miles away from Canada’s hungrier eastern markets, cheap gas from the Marcellus and Utica shales is increasingly replacing supplies from Western Canada. Gas shipments to eastern Canada from western Canadian drillers are down more than 50 percent since 2005; U.S. cargoes have doubled in that time. Over the next decade, the flow is likely to more than double again.
With its domestic eastern and U.S. Midwest markets shrinking or altogether disappearing, Canada’s slow-footed attempts to join the growing ranks of LNG exporters are all the more damaging. Canada’s federal government recently further delayed its decision on the $36 billion Pacific Northwest LNG facility. The Petronas project – while not alone – is make or break for Canada’s LNG hopes; prospective Asian buyers are running short on patience, and high on options.
Full article: Is A Gas War Between The U.S. And Canada About To Start? (OilPrice)