Management’s Discussion and Analysis
Continued delays to projects in Alberta and the associated maintenance curtailments to interruptible export service caused a complete disconnect of the Alberta market from other North American markets. Through August, Alberta prices fell from $6 per GJ to as low as negative $1 per GJ, while intraday volatility saw some days with price ranges of over $4 per GJ. Downward pressure on prices was alleviated somewhat due to record-setting heat and high oil sands demand. Because of firm contractual export capacity, SaskEnergy was well equipped to take advantage of low Alberta prices. Record Alberta storage injections through July and sustained injections (despite interruptible curtailments) in August closed the year-on-year storage deficit completely and moved end-of-quarter levels in line with the five-year average. Additional export capacity is expected online before the end of October and a significant tranche of additional capacity should be freed up by mid-winter when the 2021 Expansion Project is finally expected to be put fully in-service. Saskatchewan Natural Gas With the provincial economy continuing to recover and an improved outlook for the value-added agricultural sector, potash mining, enhanced oil recovery and power generation, there is greater potential for increased demand over the next few years. Rising energy and carbon prices do present a risk for energy-intensive industries. Local supply continues to trend downward, increasing dependence on associated gas with local oil production. Local demand continues to be increasingly met by imported supply. The completion of the above Alberta projects should improve the link between the provinces, but the availability of incremental transport will remain a high-priority variable. Natural Gas Prices The AECO daily index averaged $3.94 per GJ through the three months ended September 30, 2022, representing a moderate increase from $3.41 per GJ for the same period ended September 30, 2021; upstream system maintenance caused higher volatility, though the absolute price level began at a much higher level than previous years. High global prices were no longer enough to maintain high Western Canadian prices, as export lines were frequently completely full while the remainder of supply made its way into storage. Traditionally, most natural gas in Saskatchewan (TEP) is priced at a differential to the AECO price. This AECO to TEP differential for the quarter averaged a $1.80 per GJ premium compared to $0.27 per GJ the year prior; the difference here can, again, be attributed to weeks of maintenance that depressed Alberta prices. The differential has tightened into the end of the quarter and is more reasonably priced going into winter as maintenance activities wrap up. The following chart shows AECO natural gas prices:
AECO Monthly Index Historical Prices
$8.00
Limited Export Capacity from Alberta
Forward Price at September 30, 2022 Average Price: $4.53/GJ
$7.00
2015-Present Average Price $2.52/GJ
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
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