Canadian net exports to the US averaged 5.64 bcf/d in July, lower than last year by a chunky 1.1 bcf/d, or 16%. The reduction in net exports was partly due to various maintenance events and interruptions to pipeline transport capacity. Base effects were also particularly strong given that last year’s storage constraints in Alberta and an extremely hot US summer helped boost Canadian flows south of the border. We forecast that Canadian net exports will average 5.7 bcf/d in August—down from 6.41 bcf/d last year—and decline by 0.6-0.7 bcf/d on average over Q3 17.
A slew of maintenance issues continued to impact production in July, especially in British Columbia (BC). This included a planned outage at the province’s McMahon gas processing plant that was originally scheduled for 3–24 June but was extended to 14 July. The outage took roughly 0.5 bcf/d of flows offline. The McMahon plant continued to experience issues following the return to service, with firm capacity cut to 50% due to operational issues on 26 July. The plant now appears to be back to full service. In addition, the ANR pipeline underwent works last month, although this mainly impacted the line’s interruptible capacity over 19–23 July. The Pine River Plant, also in BC, has had reduced capacity at 34% since 3 August.
Maintenance events led to a high degree of volatility at AECO last month. Indeed, prices swung wildly over much of July—as low as 0.43 $/mmbtu on 24 July from as high as 1.98 $/mmbtu on 11 July. With intra-day minimums as low as 0.1 $/mmbtu some producers opted to shut in volumes on certain days, with Peyto reporting as much.
Despite the maintenance, gas output still appears to be holding up well. Flow data show WCSB production recovering to just above 14 bcf/d, higher by around 0.5 bcf/d y/y as of early August. WCSB output dipped to a low of 12.9 bcf/d on 13 July, right before the return of the McMahon plant. Even with the impact of July works, WCSB production averaged 0.4 bcf/d higher y/y. For August, we forecast that total gas production will average 15.5 bcf/d, higher y/y by 0.3 bcf/d. Our Q3 17 outlook calls for similar growth of 0.4-0.5 bcf/d. Given stronger production and weaker exports, Canadian storage filled at a quicker pace in July at 1.9 bcf/d, compared to 1.0 bcf/d last year. Currently, injections are on pace to leave end-October stocks 50-60 bcf higher y/y.
Oil sands gas demand looks set to improve over the coming months, following the expected return of Syncrude’s Mildred Lake upgrader after months of unplanned outages. In July, oil sands gas demand averaged 2.3 bcf/d, down slightly from 2.4 bcf/d last year. Demand should pick up in Q4 17 as new upgrader capacity comes online at CNRL’s Horizon Phase 3 and Mildred Lake runs at higher utilisation rates.