LNG Canada’s commencement gave rise to expectations of enhancing Canadian natural gas prices by tapping into Asian markets. However, the anticipated price surge has not materialized as of now.
The project initiated its export operations on Canada Day this year. Despite this, the average Alberta benchmark natural gas price in July hit its lowest point since 1985. LNG Canada, considered Canada’s largest private-sector investment, is projected to boost the country’s GDP by 0.4% once fully operational. The initial phase aims to export liquefied natural gas from two processing units, referred to as “trains,” with a combined capacity of 14 million tonnes annually.
According to Jeremy McCrea, BMO Capital Markets’ energy research managing director, there was a discrepancy in the timing of LNG Canada’s full ramp-up. Oversupply in the basin occurred due to increased gas production exceeding demand expectations.
In 2024, Canadian natural gas prices plummeted to a 40-year low, attributed to escalated production in anticipation of the LNG Canada project. Factors like warm weather and pipeline maintenance further dampened prices. Companies like Tourmaline Oil and Arc Resources highlighted pipeline maintenance as a short-term price constraint, expecting an improvement in the latter half of the year coinciding with LNG Canada’s acceleration.
LNG Canada confirmed the initiation of operations with Train 1 and plans to scale up production with Train 2, aiming for regular cargo shipments. Once fully operational, the facility anticipates loading one export cargo every two days and engaging about 15 export tanker vessels monthly.
The prolonged low prices of Canadian natural gas may benefit consumers by alleviating utility bills. Nonetheless, the extended low prices pose a revenue challenge for provinces like B.C. and Alberta reliant on natural resource royalties. Both governments have acknowledged the impact on their revenues due to the price downturn.
McCrea anticipates a resolution to the natural gas glut in the upcoming year, with producers adopting a more cautious approach. Exner-Pirot also expects a balanced market by 2026, acknowledging the unpredictable nature of commodity prices.
In conclusion, while optimistic about the future market balance, uncertainties persist due to the volatile nature of commodity prices.