Canadian gas companies have halted production due to low prices

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On Monday, two Canadian natural gas producers said they had temporarily cut production because of pipeline bottlenecks that caused gas prices in Western Canada to collapse in the second half of August.

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Tourmaline Oil, Canada’s largest gas producer, cut production in the third quarter by 1.5 percent, or 7,500 barrels of oil equivalent per day (bpd), although its full-year production forecast remains unchanged at 507,000 barrels per day.

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Kelt Exploration Ltd. lowered its full-year 2022 production forecast by 1,500 barrels per day to about 29,000 barrels per day.

Spot natural gas prices at AECO’s western Canadian hub fell last month and briefly turned negative when maintenance on TC Energy’s NGTL pipeline system cut capacity, leaving gas in Alberta and Station 2 in British Columbia.

“The company is shutting down significant volumes of gas on certain days in both Alberta and British Columbia,” Celta said in a statement.

The price collapse came amid a global surge in gas prices to record highs as European countries sought to replace Russian supplies.

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Spot Canadian gas was trading at $2.248 per million British thermal units (mmBtu) on the AECO exchange on Friday, recovering from August lows.

However, Kelt warned that AECO volatility could increase in September and October when further maintenance on the NGTL system is completed.

Calgary-based Tourmaline has shut down about 100 million cubic feet per day of existing production and delayed the start-up of several new rigs from August to September or October. The company also planned to renovate facilities and insure larger volumes of gas than usual in August.

RBC Capital Markets analyst Michael Harvey described Tourmaline’s move as a “production realignment” and said the Kelt closure was a “prudent move in the face of temporary lower gas prices.”

Tourmaline shares were last up 2.8 percent on the Toronto Stock Exchange at $79.99, while Kelt shares were down 0.8 percent at $6.33.

© Thomson Reuters, 2022