(Oil Price) – Canadian producers are temporarily shutting in natural gas wellheads amid a record-low negative pricing at the key Alberta gas hub.
The price of natural gas at the AECO Hub, the Canadian benchmark price for natural gas on the Nova Gas Transmission Ltd. (NGTL) system, has been weak all summer and plunged below zero earlier this week.
On Thursday, the daily spot price at the AECO averaged minus 5 cents per million British thermal units (MMBtu), per pricing data of LSEG cited by Reuters. Earlier in the week, the price had slumped to as low as 18 cents per MMBtu, the lowest on record.
So far this year, the Canadian benchmark gas price has averaged $1.03 per MMBtu, according to LSEG data.
Gas prices have slumped in recent months, due to a warmer-than-usual winter, sufficient gas in storage, and increased gas production in Western Canada in anticipation of rising feedgas demand for Canada’s first LNG export facility, LNG Canada in Kitimat, British Columbia, which launched exports two and a half months ago.
Companies curtailed some gas output in the summer in response to the lower gas prices.
Calgary-based Advantage Energy has curtailed production, with shut-ins exceeding previous curbs to output.
“These are the worst sustained prices we’ve seen, and therefore our shut-ins will be the most aggressive,” Advantage Energy CEO Mike Belenkie told Reuters in an interview on Thursday.
Energy firm ARC Resources chose to curb gas output and not lose money on paying for natural gas takeaway. At the Sunrise dry gas asset, ARC Resources elected to curtail in the second quarter between 75,000,000 to 200,000,000 cubic feet per day of natural gas production due to low natural gas prices, president and CEO Terry Anderson said on the Q2 earnings call.
“This effectively eliminated ARC’s cash exposure to Western Canadian natural gas pricing, thereby preserving capital and resource for periods when prices are higher and meet our threshold for profitability,” Anderson noted.
Production will be fully restored when prices recover, the executive said, adding that the company expects this to occur later this year as the ramp up of LNG Canada coincides with the conclusion of seasonal pipeline maintenance.
By Michael Kern for Oilprice.com
