(Bloomberg) -- The discount on Alberta natural gas may shrink by half once the Shell Plc-led LNG Canada project begins exports next year, according to the chief executive of the country’s largest gas producer.
AECO gas prices may strengthen to around 75 Canadian cents per million British thermal units less than prices at the US Henry Hub, Tourmaline Oil Corp. CEO Michael Rose said in an interview in Calgary Tuesday. That compares with a discount that has averaged more than C$1.50 ($1.09) since the start of June.
Roughly 1.9 billion cubic feet of daily gas production that will be required for LNG Canada is being sold into the North American market currently, depressing prices, he said. That gas will begin going into LNG Canada once it starts operation, which is scheduled around the middle of next year, Rose said.
“That sink should create strong pricing for AECO and BC Station 2” prices, he said. “You’ll pull it out of a market that’s largely imbalanced most days.”
Rose, who spoke at the opening of a compressed natural gas fueling station, has led Tourmaline during a period of rapid growth, mostly through acquisitions of other western Canadian gas drillers, including Bonavista Energy Corp. last year and Crew Energy Inc.
Tourmaline’s lower cost structure allows it to generate more cash flow from the assets than their previous owners, and the company will continue to execute on deals that “make sense,” Rose said.
“We’re patient,” he said. “We don’t have to buy anything. We have a huge drilling inventory.”
The growth has been driven by the desire to capitalize on a supply-and-demand set up for gas that’s “never looked better,” with LNG exports growing and big potential increases in demand for power for artificial intelligence data centers, Rose said. Data centers could generate an additional 5 billion cubic feet a day of gas demand in North America, Rose said, although projections range from 3 billion to 30 billion cubic feet a day.
Tourmaline last year started sending natural gas from British Columbia to Cheniere Energy Inc.’s LNG export terminal on the US Gulf Coast, and Trafigura Group also has signed long-term deals to buy natural gas and liquefied natural gas from Tourmaline, with exports starting in 2027. Tourmaline and other large Canadian producers also are pushing forward with a gas-export project of their own off the British Columbia coast, called Ksi Lisims LNG.
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