Natural gas prices fall into negative territory.
Pipeline outages and maintenance work have caused volatile swings in Alberta natural gas prices, pushing them into negative territory in recent days.
During the past few weeks, Alberta’s benchmark AECO prices have fallen into negative territory — meaning producers have had to pay customers to take their gas — on multiple days. Data from Gas Alberta Inc. show AECO prices fell to -7 cents from Oct. 5 through Oct. 9, and were also negative on Sept. 25.
“We’ve never seen negative prices before this year,” said GMP FirstEnergy analyst Martin King, who has followed AECO gas prices since 1993.
In recent years, prices for nat- ural gas by- products such as propane have fallen below zero, but the commodity itself has not fallen into negative territory in Alberta.
On Thursday morning, t he price of natural gas in the province jumped to $1.81 per gigajoule, but “it could crash again tomorrow,” King warned.
“The volatility has been ongoing for quite a few weeks and a lot of it is related, directly and indirectly, to field maintenance TransCanada has been doing on the Alberta system,” King said, adding that service has been interrupted in order to complete maintenance on natural gas gathering and transmission pipelines.
TransCanada Corp., which owns and operates the largest natural gas gathering and transmission system in the province, has been working to expand its system ahead of new service agreements coming into effect on Nov. 1, which marks the beginning of the winter heating season.
“We are very sensitive to these impacts as we carry out these normal maintenance and construction activities,” TransCanada spokesperson Shawn Howard said in an email.
He said TransCanada has been carrying out expansion work on its systems but has communicated its plans “early and often” to customers “to ensure that we can all minimize the impact to production and natural gas flowing on our system.”
Natural gas producers, meanwhile, have been filling up their storage options in Alberta and elsewhere in preparation for the winter season, when utilities burn more of the commodity to heat homes across the continent.
As a result of the volatility in the Alberta market, Kelt Exploration Ltd. announced last week it would temporarily shut in 21.4 million cubic feet of daily natural gas production.
WE NEED A PIPE FOR THE GAS TO GO INTO.
It also plans to further diversify its market exposure beginning Nov. 1, sending more gas to Ontario on TransCanada’s main line, the West Coast and U.S. markets. Kelt did not respond to a request for comment Thursday.
The extreme price swings have forced Alberta producers to make a difficult choice between selling their gas for nothing, or less than nothing, and shutting in their wells, Auspice Capital founder and chief investment officer Tim Pickering said.
“It’s a lack of infrastructure, it’s transportation restrictions, there’s been (pipeline) maintenance, there’s been all sorts of issues that have culminated at a time when we have a lot of gas, and there’s no other choice,” Pickering said.
U. S. producers, meanwhile, have enjoyed significantly higher prices. NYMEX natural gas prices have traded above US$ 2.80 per million British thermal units for over a month and moved up 3 per cent to US$2.99 per mmBtu in mid-day Thursday trading.
U. S. gas producers have been able to expand their export options — with new liquefied natural gas export projects, new export pipelines to Mexico — while Canadian producers have limited pipeline options, Pickering said.
“At the end of the day, we’re a supply basin and we need a pipe for the gas to go into.”
TransCanada’s Foothills System, a 1,241-km natural gas transmission system that carries gas for export from central Alberta to the U. S. border.