Imports of Canadian pipeline gas to the western United States have fallen substantially as spot prices at the NOVA/AECO-C (AECO) trading hub in Alberta reached near parity with Henry Hub. In April and May, imports fell to an average of 6.2 billion cubic feet per day (Bcf/d), according to Genscape pipeline flow estimates.
Spot prices at the NOVA/AECO-C (AECO) trading hub used to be between $1 per million British thermal units (MMBtu) and $2/MMBtu below Henry Hub spot prices from mid-2017 until late 2019. However, from October 2019 through March 2020, there was little difference in spot prices at those two points.
Canadian gas put into storage
In April and May - at the height of the coronavirus lockdowns - AECO natural gas spot prices increased while Henry Hub gas prices plunged.
The narrowing of AECO and Henry Hub prices was first noticeable when the Canadian in September last year, when the Canadian Energy Regulator approved a temporary service protocol (TSP) for the NOVA pipeline system. The TSP increases service flexibility on the pipeline by handling gas flows to storage facilities at times when the system is constrained.
In March and April 2020, Alberta’s natural gas inventories were at multiyear lows of slightly more than 300 billion cubic feet. Hence, most production from Western Canada was put into storage and not exported to the United States.
Imports not seen to recover before 2021
Imports of Canadian gas at the border crossing in Montana and North Dakota were 0.4 Bcf/d and 0.3 Bcf/d less in January through May 2020, compared with the first five months last year, U.S. Government data shows.
Gross imports of Canadian pipeline gas are expected to fall from 7.4 Bcf/d in 2019 to 7.0 Bcf/d in 2020 - the lowest level since the mid-1990s. Demand for Canadian gas is forecast to start recovering with the upcoming winter season and could reach an estimated 7.9 Bcf/d in 2021.