Canadian Gas Exports to US Midwest Down 20%
Canadian natural gas exports to the US Midwest fell by about 20% in the first half of 2020, the Canada Energy Regulator (CER) said October 28. It was the largest contributor to an overall 10% decline in exports to the US through July.
All three pipelines serving the US Midwest – TC Energy’s Mainline, the Foothills Saskatchewan pipeline (which feeds the Northern Border pipeline in the US) and the Alliance pipeline to Chicago – saw reduced flows in the first half, CER said in a market snapshot published on its website.
“Decreased exports to the Midwest during the first quarter of 2020 were largely because of increased natural gas processing capacity in the US Bakken,” the snapshot said. “More Bakken gas supplying the Midwest markets crowded out Canadian gas imports on the Northern Border.”
Associated gas production from the Bakken ramped higher in the first quarter as crude oil production rose, and most of that went into the Northern Border system, squeezing out Canadian producers. In the first quarter, the CER said, exports through the Foothills system averaged 640mn ft3/day, 30% below the Q1 2019 average, and by the end of the first quarter were 43% lower than a year ago.
Bakken gas production began to decline in April as impacts from Covid-19 mitigation measures and the Saudi-Russia crude oil price war cut demand for domestic crude, opening some space on Northern Border for Canadian producers.
However, low gas storage levels in Alberta and narrow price differences between Canadian and US markets led Canadian producers to put more gas into storage than into exports to the US, pushing flows on the Foothills-Northern Border system to a decade-long low in April, the CER said.
“The supply-demand balance in US natural gas markets may tighten during the upcoming winter season, mostly due to lower associated gas production driven by the weaker oil price environment,” it said. “A continued reduction in associated gas supply in the US could lead to an increased demand for Canadian gas exports to the US Midwest as well as higher [western Canadian] prices in the coming winter months.”