Western Canadian natural gas production has been on a roll over the past two years, reaching a record 17.3 Bcf/d in 2022. Another year of strong growth was expected in 2023, but Mother Nature he had other plans, as usual. First, a milder-than-average heating season left plenty of gas in storage, pushing natural gas prices lower in North America. Second, dry conditions in some of the best gas producing areas in Alberta and British Columbia led to what has been a very active wildfire season so far and forced producers to reduce their gas production numerous times in May and June. From our early expectations for production growth of 1.2 to 1.4 Bcf/d this year, wildfire impacts and a healthy dose of pipeline maintenance have cut our production growth outlook by in 2023 at only 0.4 Bcf/d. As we discuss in today’s RBN blog, this slowdown in growth is exactly the opposite of what is needed to avoid a price hike. A strong production boost will be required in 2024 and 2025 to accommodate the commissioning of the LNG export facility in Canada, continued growth in Canadian gas demand and pipeline exports to the US.
Gas production in western Canada had been experiencing something of a renaissance in the past two years. A long-awaited recovery in natural gas prices finally began to materialize in late 2021. Painful pipeline maintenance flow restrictions, which had severely hurt AECO’s benchmark price for several summers, were beginning to ease as more regional pipeline capacity was added. And producers were making incredible strides in advancing wellhead productivity and recovering reserves from unconventional gas plays, including the famous Montney formation.
It all came together in 2022, topped off with record gas production that year of 17.3 Bcf/d (dashed red circle in Figure 1), a gain of more than 1.2 Bcf/d (~8%) with respect to 2021, also a record in terms of year-on-year growth in production. With producers beginning to set their sights on additional growth this year and into 2024, as Western Canada prepares for LNG exports in 2025 through LNG Canada in British Columbia (BC), additional strong growth was expected to ensure sufficient gas for LNG exports. Canadian consumption and pipeline exports to the US
