By Alex Kimani – Apr 29, 2025, 7:00 PM CDT
Amid falling oil prices, Canadian energy producers are increasingly focusing on natural gas.
The delayed LNG Canada project is nearing launch and is expected to raise Alberta gas prices by redirecting supply from the U.S. to Asia.
Producers are also targeting condensates in the Montney to meet rising oil sands diluent demand.
Canadian energy producers are focusing more on natural gas as oil prices suffer the combined effects of the U.S. president’s tariff offensive against the world and OPEC+’s decision to change tack and boost output.
The Western Canadian Select benchmark dived from about $59 per barrel at the start of April to just $50 per barrel now. Yet drillers started turning to natural gas to regain their balance much earlier than April.
Bloomberg this week cited data from the Alberta Energy Regulator showing that new well-drilling licenses issued during the first quarter of the year for natural gas wells rose by a sizable 26% to a total of 308. This, Bloomberg noted in its report, was the highest number of new natgas well-drilling licenses issued over a quarter since 2023. During the same period, the number of new licenses for oil wells declined by a matching 24%.
Trump’s presidency and his tariff-based trade policy could certainly be said to have had a role to play in these developments. So does OPEC+ production policy. However, there is another reason: liquefied natural gas. Back in October 2024, the chief executive of Canada’s biggest natural gas producer, Tourmaline Resources, said that Alberta gas prices were set to lose their discount once the LNG Canada project entered into operation.
Related: World Bank: Get Ready for a Commodity Price Freefall
LNG Canada is a joint venture between Shell, with 40%, Malaysia’s Petronas with 25%, Mitsubishi Corp. with 15%, Korea Gas Corp. with 5%, and PetroChina with 15%. The facility will process 1.9 billion cubic feet of natural gas per day—a significant chunk of Canada’s output, which, as of 2024, averaged 18.1 billion cu m. Once operational, the project is expected to boost Canadian natural gas prices, as supply that previously flowed south to the U.S. gets redirected to Asian markets.
Originally scheduled to enter into operation at the end of 2024, LNG Canada was delayed due to adverse weather conditions. Earlier this month, the facility received its first LNG cargo that the operator will use to test its equipment. “This activity is critical to our safe start-up and commissioning process in advance of our operations, and to achieving our first LNG export cargoes by the middle of 2025,” LNG Canada said.
There could hardly be a better time to join the international LNG game. China has completely stopped buying U.S. liquefied natural gas since it slapped tariffs on U.S. energy imports in retaliation for Trump’s original tariffs. China is a big LNG buyer even though it wasn’t buying all that much U.S. LNG. Other Asian countries are also significant importers of the superchilled fuel and most forecasters expect demand for it to only grow in the future. It appears that statements by former Prime Minister Justin Trudeau and his resource minister Jonathan Wilkinson that there was no business case for LNG in Canada were not exactly accurate.
Bloomberg quoted an Enverus’ team leader for Canadian oil and gas, Trevor Rex, as reporting that energy companies active in the Montney formation had been shifting from oil to gas recently—and not only natural gas. Drillers in the Montney formation are also boosting production of condensates in anticipation of stronger demand for diluents for oil sands crude, which means the future of Canadian crude is not too shabby, either. “We think condensate is a good place to be in the next few years as oil sands diluent demand ramps up,” Enverus’s Rex told Bloomberg. LNG is a good place to be as well. If done right, Canada’s LNG expansion could turn it into a bigger global player than Australia—and add C$75 billion to the economy, annually.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com
Oil Prices Drop as Supply Concerns Continue World Bank: Get Ready for a Commodity Price Freefall Aluminum Premiums Surge After New Tariffs Imposed
Download The Free Oilprice App Today
Back to homepage
https://oilprice.com/Energy/Energy-General/Canadas-Energy-Players-Boost-Gas-Business-Amid-Oil-Price-Rout.html
