Management’s Discussion and Analysis
Saskatchewan as a Net Importer Saskatchewan remains a net importer of natural gas, and securing reliable sources of supply remains a high priority. The Corporation continues to work with other gas line companies and the new Canada Energy Regulator to ensure that projects in Saskatchewan and beyond meet provincial requirements. Some risk of constrained imports into the province has been reduced by the Regulator’s recent recommendation that a major project in Alberta proceed 1 . As a shipper, the Corporation argued on behalf of the project. It is expected to be in-service by 2021.
CHANGE IN SASK SUPPLY & DEMAND
450 400
NET IMPORTER
NET IMPORTER
NET EXPORTER
350
FORECAST
300
250 200 150 100 50 0
ALBERTA SUPPLY
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
2021 2024 2018
Sask Load Forecast Update
Saskatchewan Load Sask Load Forecast
Saskatchewan Supply Sask Supply Forecast
Natural Gas Prices The price of natural gas is set in the open market and influenced by a number of factors including production, demand, natural gas storage levels, take-away capacity, and economic conditions. Given the high demand for natural gas to heat homes and businesses during the cold winter months, and the demand for natural gas to produce electricity for air conditioning during the summer months, weather typically has a large impact on prices in the near term. Due to the high degree of uncertainty associated with weather and Alberta gas line maintenance and infrastructure issues, natural gas prices in both Alberta (AECO) and Saskatchewan (TEP) have been very volatile in recent years. Natural gas market fundamentals started the year in a strong supply position relative to demand, but at the end of the year, supply had decreased at a greater rate than demand. The Alberta Energy Company (AECO) daily index averaged $1.53 per gigajoule (GJ) throughout the 12 months ending March 31, 2020 compared to $1.55 per GJ the year prior. The year ended in an upward price trend, which is expected to continue.
Alberta natural gas prices ended the year at elevated levels due to an oil price shock, reducing associated natural gas supply in North America. The 2019 summer season was characterized by constrained exports causing negative spot prices several times over the season. However, at the beginning of October 2019, TC Energy (formerly TransCanada) enacted a temporary policy that reduced volatility and contributed to stronger pricing. Recent price volatility has elevated and is primarily driven by reduced supply being greater than reduced demand. AECO storage levels are currently under five-year lows but the winter season is currently trading higher than summer so the Corporation is expecting AECO storage to fill in 2020. Traditionally, most natural gas in Saskatchewan (TEP) is priced at a differential to the AECO price. This AECO to TEP differential for the 12 months ending March 31, 2020 averaged $0.40 compared to $1.21 for the prior year. The decreased differential can be attributed to the TC Energy curtailment policy that has allowed for higher levels of natural gas to flow through its interruptible Eastgate service along with elevated price levels at AECO.
1 Canada Energy Regulator. (2020). Nova Gas Transmission Ltd. GH-003-2018. Calgary, AB. Retrieved from https://docs2. cer-rec.gc.ca/ll-eng/llisapi.dll/fetch/2000/90464/90550/554112/3422050/3575553/3575989/3905746/C04761-1_ Canada_Energy_Regulator_Report_-_NOVA_Gas_Transmission_Ltd._GH-003-2018_-_A7D5G0.pdf?nodeid=3905626&vernum=-2
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