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 dippedslightly in 2015, though Alberta and British Columbia (BC) provinces – the Montney and Duvernay shales – proved resilient.
While non-core plays will continue to struggle, the NGL-rich and relatively low-cost gas from the Montney looks to drive a rebound in 2016. Led by Petronas (Progress Energy Canada), Canadian Natural Resources, ARC Resources, and Encana as well as smaller-cap producers like Painted Pony Petroleum, marketed production from Alberta and BC is projected to grow approximately 2 and 6 percent respectively this year. Across all provinces and territories, Canadian production is slated to rise nearly 2.5 percent, to just over 15.3 billion cubic feet per day (Bcf/d).
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