Natural gas fundamentals remain in a strong supply position relative to demand. AECO weighted average 5A index (daily settlement) price was $1.39 per gigajoule (GJ) through the nine months ending December 31, 2019 compared to $1.24 fo the same nine months in 2018.
SaskEnergy Incorporated First Quarter Report
March 31, 2011
Alberta natural gas prices saw high volatility in the summer season due to maintenance that limited supply and takeaway capacity. Reduced exports caused negative spot prices several times over the summer season. However, at the beginning of October 2019 TC Energy (formally TransCanada) changed curtailment policies which reduced volatility and contributed to stronger pricing. This policy has had a positive impact on storage injections in Alberta but storage levels are still at lower levels than any of the previous five years. Recent price volatility has reverted to seasonal norms and is primarily driven by weather. With low storage levels in Alberta, the expectation is for prices to remain elevated for at least the remainder of this winter season. Traditionally, most natural gas in Saskatchewan (TEP) is priced at a differential to the AECO price. This AECO to TEP differential for the nine months ended December 31, 2019 averaged $0.49 compared to $1.53 for the year prior. The decreased differential can be attributed to the TC Energy curtailment policy that has allowed for higher levels of gas to flow through its interruptible Eastgate service. With this policy in place and planned facility upgrades, expectations for a smaller TEP differential will continue going forward.
The following chart shows AECO natural gas prices:
Constraints of Existing Infrastructure
Despite the shift to horizontal drilling methods improving gas supply economics, getting western Canadian gas to market has remained a major concern. Gas well drilling west of Saskatchewan has tended to move farther into northwestern Alberta and northeastern British Columbia. This has resulted in delivery infrastructure that is constrained due to undersized facilities.
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2019-20 THIRD QUARTER REPORT
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