CIBCEQUITY RESEARCH
January 19, 2023 Industry Update
Natural Gas Guide: Blueberry Reaches
Resolution in NEBC
Winter Expected To Return In February
A Few Things We Are Watching
BC Government and Blueberry River First Nations reach agreement on
industrial development. We take the update as a net positive for a new
permitting process returning to the region, albeit with some expected caveats
on new surface disturbances. There are additional details needed, and we
expect will be available in due course, but we see this as a key update
towards reducing uncertainty. We see the update as carrying positive
implications for key future projects advancing in the region, such as the
second phase of LNG Canada, and expect it should naturally benefit energy
service companies. NYMEX closed Wednesday at US$3.41/MMBtu (down
US$0.34/MMBtu W/W). AECO basis narrowed to US$0.56/MMBtu below
NYMEX (-US$0.55/MMBtu last week), and Station 2 basis narrowed to
US$1.08/MMBtu below NYMEX (-US$0.42/MMBtu last week).
Warm spell continues, but winter is not over yet. Near-term weather
models are pointing to continued warm conditions but the end of January
and early February seeing below-normal temperatures return to North
America. Kinder Morgan announced that the El Paso Natural Gas Pipeline
would complete repairs in January and then seek approval to reopen. The
L2000 segment exploded in mid-2021, cutting off ~0.6 Bcf/d of gas flows to
California. Western price benchmarks for spring/summer sold off as a result.
U.S. gas in storage decreased by 82 Bcf last week, above consensus
expectations of a 76 Bcf draw, reaching 2,820 Bcf. Stocks were 19 Bcf lower
than 2022 levels and 34 Bcf above the five-year average.
European storage expected to exit winter at ~50% capacity, reducing
the risk of a shortfall for winter 23/24. Benchmarks are trading below their
pre-invasion levels despite a brief cold snap expected in the coming week.
The risk of a supply shortfall for winter 2023/2024 is now greatly diminished,
meaning global LNG prices are likely to trade closer to their transportation
basis to NYMEX. European storage volumes decreased ~58 Bcf last week
and closed at 3,113 Bcf, which is 652 Bcf above the five-year average. U.K.
NBP closed Wednesday at US$19.26/MMBtu (up US$1.49/MMBtu W/W),
while Netherlands TTF closed at US$18.98/MMBtu (down US$2.59/MMBtu
W/W). JKM closed at US$23.09/MMBtu (down US$3.78/MMBtu W/W).