This month, much of North America experienced a cold snap, spiking energy prices, straining power grids and leaving many without heat or power. Parts of the continent are getting a taste of what Northern communities deal with every day in winter.
While the weather will eventually return to normal, it’s corresponding with some positive market forces that are allowing Canadian natural gas better access to U.S. markets, resulting in longer-term growth and an opportunity to seek a fair price for Canadian resources.
What does all this mean for Canadians? 2020 was a tough year for Canada’s energy sector. The number of active drilling rigs and capital investments were way down, and communities across the country struggled with layoffs and reduced local spending. Natural gas storage was full, waiting for demand to return. The effects were even larger south of the border, where rig counts have been decimated and some companies shut their doors.
In 2021 we’ve already seen optimistic numbers showing a forecasted increase in capital spending and several mergers and acquisitions. According to recent Baker Hughes data, Canada’s active rig count has surged from nine last year to 76, while the U.S. natural gas rig count is at 90, up from a low of 68 in July.
Storage is now being drawn down due to significant demand and according to IHS Markit, Canadian natural gas producers are forecasted to export 7.5 billion cubic feet per day (bcf/d) in February 2021. This winter has already seen 7% demand growth with December 2020 consumption at 8.4 bcf/d compared to 7.8 bcf/d last February. This is also 34% higher from 6.3 bcf/d consumed in April 2020 during the beginning of the pandemic according to data from Canadian Energy Regulator (CER).
Cold weather also offers a lesson in what reliable power and heat look like in cities facing colder temperatures.
Across Canada, there have been movements to ban natural gas use in cities. Building codes banning natural gas in newly-built buildings have been passed in Vancouver and others are being debated. While it might be relatively easy for places powered by hydro-electricity to make that switch, for many locations in North America, that’s not easy without natural gas.
In many cases, natural gas provides vital electricity on top of the hydro-generated baseload when demand significantly increases. Natural gas is a cleaner alternative to coal and a safe and reliable fuel source. And while renewables will continue to play a more significant role, intermittent power like solar and wind can be severely impacted by the weather and must be properly winterized.
That’s why we need to support sensible energy policy that doesn’t leave people in the cold.
It’s not just North America. The average low for February in Beijing is -6℃ and in nations like China, where the energy mix is much more focused on coal, this means increased emissions in the winter, when demand for energy increases.
When liquefied natural gas (LNG) is discussed in Canada, it’s often in the context of helping China switch from coal to natural gas. Because if the world continues to burn coal during each winter’s spikes in energy demand, global emission reduction goals won’t be achieved. Natural gas from Canada can be a part of the solution.
That’s explicitly the idea underpinning projects like LNG Canada, Woodfibre LNG and FortisBC’s Tilbury LNG expansions: to help export cleaner-burning natural gas, create jobs in B.C., heat homes abroad and reduce global emissions.
So bundle up, and thank someone working out in the cold on a pipeline, or a drilling rig this year. They’re helping to heat homes and reduce emissions everywhere.