Extreme volatility has taken North American gas prices from $1.50 per mmcf (million cubic feet) in June 2020 to almost $10 two years later, with LNG prices almost 10 times higher..The European market, especially Germany, quickly adjusted by accessing LNG, constraining industrial activity and going back to coal in record amounts. An unusually warm winter helped rescue the country from damaging high gas prices. The fire last June at the Freeport export facilities on the Gulf of Mexico denied the export of 2 bcfpd, thereby adding to North American supply and depressing domestic prices..Over the last decade, US gas production at least doubled, including another additional 3 bcfpd last year. The oversupply, exports denied, and warm winter weather increased inventory levels..The result is a collapse of North American prices, now trading again well below $3. Gas is presently a bargain..Likewise LNG; one of the significant aspects of energy this decade, is the emergence and growth of LNG as the 'cleanest' fossil fuel. This means fewer greenhouse gas emissions from production to combustion. The infrastructure necessary for the anticipated growth is rapidly being built..With 44 countries now importing LNG, natural gas is becoming more of a commodity. According to a recent blog by RBN Energy, gas is resembling “more closely the oil market with not only international companies as major participants, but also traders and utility buyers, all of whom are contributing to a vibrant international LNG marketplace.”.The prominence of LNG was greatly enhanced by recent events in Europe. Eventually, like oil, there will be a global price..Production is dominated by a few large producers — the US is on the cusp of replacing Qatar as the largest — both countries have significant plans for growth. Australia is also a significant producer, mostly offshore, and Mozambique is in the game. Canada is the fourth largest producer, boasting the largest prospective reserves. Currently we only export by pipelines to the US while awaiting the completion of LNG Canada export infrastructure..Like the oil story (about 40% of US gas production is” associated” with oil production) the incredibly productive shale basins are reaching the tipping point when production declines. Production will likely moderate, and/or marginal costs will increase, as drillers move to Tier 2 reservoirs..Again, according to RBN Energy, “LNG capacity additions will accelerate, bringing on an incremental 3 bcfpd of feed gas each year on average between 2024 and 2026, and more thereafter. This incremental 14 bcf of demand in the face of moderating production growth.”.Ongoing pipeline and facility obstruction and deteriorating well performance mean “the lower 48 gas market is headed for a period of gas shortages,” and higher prices..THE TABLE IS SET FOR CANADA.In a recent column in the Calgary Herald, industry icon Mike Rose said it all in his first sentence: “Canada has a compelling opportunity to simultaneously improve the global atmosphere, materially build our overall economy, and contribute to the growing First Nations prosperity.” A baseball aficionado, Mike utilizes a hockey metaphor, describing this as a “hat trick.”.As the CEO of Tourmaline, Canada’s largest gas producer, he wrote natural gas “is the most dense by mass of the entire fossil fuel group and generates the lowest emissions when ignited.” He further pointed out its growth profile will take it “to as much as 35 to 40% of the entire energy stack within 10 years.” This rivals the current global market share of oil..This most credible voice in the country further points out our significant natural gas bounty. For example, the Montney Basin which competes favourably with any US shale basin. It has only produced 22 tcf (trillion cubic feet) of the estimated ultimate recovery potential of 645 tcf. Rose refers to estimates that LNG Canada will earn $9-$12 billion in annual export income to the Canadian economy. He also reminds us the additional production will require $3 to $3.5 billion of annual capital investment — “a massive repeatable economic win in terms of jobs, revenues, and taxes for the entire country.”.Mike further suggests “if we choose to grow our Canadian LNG business to 10 bcfpd, we're looking at an opportunity for Canada to lead the world in global emissions reductions.”.Isn’t that the policy priority in Ottawa?.Is there any doubt this opportunity would be vigorously pursued if the energy sector were based in central Canada?.As I pointed out in yesterday's review, Canada's long-term economic prospects are dismal. The LNG opportunity to supply suddenly gas deficient Europe, also available in Quebec and Atlantic Canada, is a compelling win for Canadians from coast-to-coast. This also supports the obsessive government priority Canada be a global leader with respect to emission reductions, all 1.6% of global levels..One of the few successful global reduction initiatives, the US conversion of coal to natural gas for electrical generation, could be replicated with Canadian gas and leadership. Natural gas is also an easy, efficient, and economic back up for renewable energy..This is an overwhelming business case for the prime minister. Helpful lyrics from Street Fighting Man: “where I live the game they play is compromise soluuution”. Yet there is no compromise from Ottawa despite growing clamour to capture the opportunity..Do we have to continue to be beggars to the federal government versus the continued policy framework to undermine and ultimately eliminate Western Canada’s energy sector?.That outcome will be much more spectacular and memorable than a cream pie battle..Regrettably, much more..Herb Pinder is a Saskatchewan-based private equity investor.
Extreme volatility has taken North American gas prices from $1.50 per mmcf (million cubic feet) in June 2020 to almost $10 two years later, with LNG prices almost 10 times higher..The European market, especially Germany, quickly adjusted by accessing LNG, constraining industrial activity and going back to coal in record amounts. An unusually warm winter helped rescue the country from damaging high gas prices. The fire last June at the Freeport export facilities on the Gulf of Mexico denied the export of 2 bcfpd, thereby adding to North American supply and depressing domestic prices..Over the last decade, US gas production at least doubled, including another additional 3 bcfpd last year. The oversupply, exports denied, and warm winter weather increased inventory levels..The result is a collapse of North American prices, now trading again well below $3. Gas is presently a bargain..Likewise LNG; one of the significant aspects of energy this decade, is the emergence and growth of LNG as the 'cleanest' fossil fuel. This means fewer greenhouse gas emissions from production to combustion. The infrastructure necessary for the anticipated growth is rapidly being built..With 44 countries now importing LNG, natural gas is becoming more of a commodity. According to a recent blog by RBN Energy, gas is resembling “more closely the oil market with not only international companies as major participants, but also traders and utility buyers, all of whom are contributing to a vibrant international LNG marketplace.”.The prominence of LNG was greatly enhanced by recent events in Europe. Eventually, like oil, there will be a global price..Production is dominated by a few large producers — the US is on the cusp of replacing Qatar as the largest — both countries have significant plans for growth. Australia is also a significant producer, mostly offshore, and Mozambique is in the game. Canada is the fourth largest producer, boasting the largest prospective reserves. Currently we only export by pipelines to the US while awaiting the completion of LNG Canada export infrastructure..Like the oil story (about 40% of US gas production is” associated” with oil production) the incredibly productive shale basins are reaching the tipping point when production declines. Production will likely moderate, and/or marginal costs will increase, as drillers move to Tier 2 reservoirs..Again, according to RBN Energy, “LNG capacity additions will accelerate, bringing on an incremental 3 bcfpd of feed gas each year on average between 2024 and 2026, and more thereafter. This incremental 14 bcf of demand in the face of moderating production growth.”.Ongoing pipeline and facility obstruction and deteriorating well performance mean “the lower 48 gas market is headed for a period of gas shortages,” and higher prices..THE TABLE IS SET FOR CANADA.In a recent column in the Calgary Herald, industry icon Mike Rose said it all in his first sentence: “Canada has a compelling opportunity to simultaneously improve the global atmosphere, materially build our overall economy, and contribute to the growing First Nations prosperity.” A baseball aficionado, Mike utilizes a hockey metaphor, describing this as a “hat trick.”.As the CEO of Tourmaline, Canada’s largest gas producer, he wrote natural gas “is the most dense by mass of the entire fossil fuel group and generates the lowest emissions when ignited.” He further pointed out its growth profile will take it “to as much as 35 to 40% of the entire energy stack within 10 years.” This rivals the current global market share of oil..This most credible voice in the country further points out our significant natural gas bounty. For example, the Montney Basin which competes favourably with any US shale basin. It has only produced 22 tcf (trillion cubic feet) of the estimated ultimate recovery potential of 645 tcf. Rose refers to estimates that LNG Canada will earn $9-$12 billion in annual export income to the Canadian economy. He also reminds us the additional production will require $3 to $3.5 billion of annual capital investment — “a massive repeatable economic win in terms of jobs, revenues, and taxes for the entire country.”.Mike further suggests “if we choose to grow our Canadian LNG business to 10 bcfpd, we're looking at an opportunity for Canada to lead the world in global emissions reductions.”.Isn’t that the policy priority in Ottawa?.Is there any doubt this opportunity would be vigorously pursued if the energy sector were based in central Canada?.As I pointed out in yesterday's review, Canada's long-term economic prospects are dismal. The LNG opportunity to supply suddenly gas deficient Europe, also available in Quebec and Atlantic Canada, is a compelling win for Canadians from coast-to-coast. This also supports the obsessive government priority Canada be a global leader with respect to emission reductions, all 1.6% of global levels..One of the few successful global reduction initiatives, the US conversion of coal to natural gas for electrical generation, could be replicated with Canadian gas and leadership. Natural gas is also an easy, efficient, and economic back up for renewable energy..This is an overwhelming business case for the prime minister. Helpful lyrics from Street Fighting Man: “where I live the game they play is compromise soluuution”. Yet there is no compromise from Ottawa despite growing clamour to capture the opportunity..Do we have to continue to be beggars to the federal government versus the continued policy framework to undermine and ultimately eliminate Western Canada’s energy sector?.That outcome will be much more spectacular and memorable than a cream pie battle..Regrettably, much more..Herb Pinder is a Saskatchewan-based private equity investor.
