By Kevin Orlan
AECO prices began to climb in September, and the rally gained momentum at the end of the month when TC Energy Corp. temporarily changed the tariffs on its NOVA Gas Transmission Ltd. pipeline network, or NGTL, which carries much of Alberta’s gas production. The modification gave producers increased access to storage during periods of maintenance on the system, damping pricing volatility during the often turbulent summer and fall seasons.
The gains persisted into November, even after the temporary rule change went out of effect, as producers who have been hammered by “dismal” AECO prices over the past two years dialed back on drilling, RS Energy Group associate Thomas Kirk-Pearson said in an interview. Western Canadian gas production declined by 300 million cubic feet a day last year and may slide another 1.7 billion cubic feet a day this year, Kirk-Pearson said.
Prices also have gotten a bump in recent days as cold weather settled in over western Canada, increasing local heating demand, he said. The future of the rally may hinge on whether the recent higher prices encourage producers to increase drilling activity.
“The next couple months are going to be very important to the story,” Kirk-Pearson said. “We’ll be watching very closely to see if rigs pick back up.”