Saturday, January 25, 2014

Western Canadian Natural Gas Production Rising?

The production of Natural Gas in Western Canada has been steady, with perhaps a slight decline, for the past two years.  Most forecasts have indicated it will remain within a tight range in the coming year.  However, the gas rig count in Alberta has been rising steadily (the oil rig count has fallen modestly), and the reports from producers indicate that efficiency and reserves per well are increasing.  Furthermore, the advent of pad drilling should reduce the downtime in spring due to road conditions.

Most Western Canadian production is in Alberta, and the TransCanada NOVA pipeline system reports field receipts daily online.  Using it as a proxy for total supply, here are the YOY comparisons.  Note that field receipts are rising in January.  This may be explainable by temporary factors (previously shut-in supply returning due to higher prices, flush production after winter freeze-offs, etc..), but it may also herald the beginning of rising production.  It would be surprising that a horizontal rig count of over 100 would not soon show itself in rising output, by analogy to the U.S., where output of over 65 BCFD is sustained with a rig count of only 300+.

Historically, Alberta production has not shown much of a seasonal pattern, with the exception of a slight decline in Q3 that lags the annual Q2 rig count decline.