Western Canada’s natural gas is currently selling for about $2.91/Mcf (thousand cubic feet). This is quite a high number considering the past two years have seen a range of sub-$1 to $3/Mcf. Unquestionably, Canada has a premier natural gas resource which allows producers to be fairly profitable at today’s prices. But when compared internationally, Canada’s natural gas fetches prices among the lowest in the world.
After looking at LNG prices (both current and historically), Canada’s lack of action on LNG development is enough to make you sick.
LNG prices in Asia have been have been between $15 to $20 per Mcf between 2011 and 2014 and between $10 and $15 in 2015. 2016 prices are in the $4 – $7 range.
Essentially, Canada could have been producing Natural Gas for $1-$1.50/Mcf, loading it on an LNG tanker, shipping it to Asia and selling it for $20/Mcf. Taking into account all the transportation and liquefaction costs, the margins could have been incredible. Way better than the margins on $100/bbl oil.
This is why PETRONAS took such a strong foothold in Canada’s natural gas industry with its acquisition of Progress Energy and the establishment of Pacific Northwest LNG. They were poised to take advantage of the incredible opportunity which virtually any other resource-producing nation would have exploited.
Unfortunately, Canada missed the boat (literally) on the highly profitable LNG pricing scheme. However, LNG prices are still in the $7-$8/MCF (CAD) range, but with the amount of LNG activity occurring by state-owned and multinational companies, Canada will need to act now to have any hope competing in the global natural gas market.