Deloitte forecast sees positive second half for oil and gas
A combination of infrastructure advancements, increased export capacity, and steady production growth is setting a positive tone in the oil and gas markets for the second half of 2024, market advisory firm Deloitte Canada said July 9 in its latest forecast.
The forecast, by Deloitte Canada’s Resource Evaluation and Advisory (REA) group, remains positive for natural gas, despite North American natural gas prices that remained weak through the first half of 2024 on soft winter demand and higher than average storage levels in both the US and Canada.
According to US Energy Information Administration (EIA) data, working US storage totalled 2,893bn ft3 at the end of May, 25% higher than the five-year average and 15% above year-ago levels.
Henry Hub prices received a boost in June from weaker domestic US gas production and the resumption of exports from the Freeport LNG facility. But prices in western Canada saw no such lift as both production and storage levels remained high, Deloitte said.
In the face of weaker prices, targeted natural gas drilling declined across Canada and the US, with the total number of active rigs in Q2 2024 falling to 170, well below the 201 active rigs in the same period a year ago.
The one anomaly is in BC, where the number of active rigs – generally in the prolific Montney formation – have trended higher since the summer of 2022 as producers ramp production higher in anticipation of upcoming LNG exports.
With the 14mn tonnes/year LNG Canada project expected to begin commercial operations in 2025, the smaller 3.3mn tonnes/year Cedar LNG project recently sanctioned, construction underway on the 2.1mn tonnes/year Woodfibre LNG project, the proposed 12mn tonnes/year Ksi Lisims LNG project advancing in the regulatory process and smaller ISO export facilities on drawing boards, potential export volumes from Canada’s west coast could reach nearly 6.6bn ft3/day, Deloitte said, citing Natural Resources Canada estimates.
And, it said, an estimated 2,700 MW of gas-fired power generation is expected to come online this year in Alberta.
“Despite factors like a mild winter demand and higher-than-average storage levels, the natural gas sector is poised for significant growth, driven by ongoing LNG projects and rising demand for gas-fired electricity generation in Canada,” said Andrew Botterill, at partner in Energy, Resources & Industrials at Deloitte Canada.
Still, while such factors point to an optimistic second half this year, continuing to evolve Canada’s energy mix will require careful planning within the entire energy ecosystem, Deloitte said in a spotlight article within its forecast.
That article outlines the challenges posed by the evolving policy landscape and the lack of interconnection between levels of government and industry, hindering effective decision-making.
“Achieving net-zero objectives will require comprehensive planning, integrated analysis, and quantitative approaches that consider the entire energy system,” said Lesley Mitchell, Deloitte Canada’s director, Resource Evaluation and Advisory. “The monumental scale of investment needed demands robust decision-making tools to unlock capital.”