As the summer season winds to a close, oil and gas prices are starting to fall.  The hot summer temperatures that briefly boosted gas prices have been replaced by the impacts of a hurricane season that was a non-event, mild temperatures for most of North America and full storage, easing commodity prices. 

Spot gas prices at NIT (NOVA Inventory Transfer) are at C$4.22/GJ as of September 22, 2006 with the potential to drop lower as North American gas storage facilities are expected to reach record highs by the end of summer.  As expected, the more marginal shallow gas plays in the Western Canadian Sedimentary Basin (WCSB) have become uneconomic to develop, causing a sharp decline in rig activity in the months of August and September and a slowing in shallow gas well drilling since spring breakup.  This has been reflected in a slowing of gas supply growth in Alberta for June and July. 

Plant and pipeline maintenance as well as wet weather will likely negatively impact supply in September.  We expect that the annual WCSB supply will grow slightly, in the range of one to two per cent for the 2005/2006 Gas Year.  Most of the growth occurred earlier on in 2006 as pent-up supply due to last year’s wet summer.  Rig activity is expected to be strong again this winter although gas drilling is expected to be slightly lower.  Assuming a more normal 2006/2007 winter weather-wise than last winter, WCSB supply is expected to average 17.0 Bcf/d, essentially flat or declining compared to last winter.  With increasing WCSB demand, exports from the basin are expected to drop winter over winter.  Alberta System flows this winter will likely fall in the range of 11.3 – 11.6 Bcf/d. 

Watch Customer Express for a full presentation on this information coming soon!

For more information on WCSB industry activity and the winter supply/demand outlook, please contact Craig Yano at 403.920.2255 or Al Jamal at 403.920.2265.