A natural gas shortage in Canada is expected to last through the winter months, forcing gas users ranging from industrial forces to local governments to seek alternative fuel sources and strategies for slashing consumption and conserving the gas they have. The shortage stems from this month’s pipeline explosion near Prince George, British Columbia.
In the aftermath of the explosion, FortisBC, one of British Columbia's largest utilities, says that their supply of natural gas will be reduced by a whopping 50 to 80 percent throughout the coldest months of the year. This sudden squeeze will necessitate a lot of unforeseen expenditures on alternative fuel sources. This is a cost that will be passed directly onto consumers, affecting everything from the price of gas and heating to even the price of vegetables, among other subsequent price hikes.
Natural gas has service has already been restored to the province in the wake of the October 9th disaster, and pipeline owner Enbridge says that it will have the section of the pipeline that ruptured back online by the middle of November. The National Energy Board, however, has mandated that Enbridge limit pressure in the ruptured line, and a smaller line nearby will also remain running below capacity until the spring of next year. As a safety measure, pressure levels will be kept at 80 percent along the entire length of the damaged pipeline up to the United States border.
The shortage is occurring in what is one of the cheapest natural gas markets in the world. Canadian gas has been hit hard by competition from the United States and limited pipeline infrastructure, which has only been made worse by the Prince George explosion. After the announcement that FortisBC’s pipes would remain running under capacity through the winter, gas prices fell to a five-month low last week. This is all to say that the sticker shock will be all the more severe for industries turning from natural gas to alternative fuel sources to overcome the winterlong shortage.
The biggest effect of the natural gas shortage will be felt by the Canadian industrial sector, which consumed about double the amount of natural gas used by residential and commercial users according to data gathered by the provincial government in 2016. FortisBC has also made it clear that their highest priority are the residents, who need to keep their homes warm during the coldest months of the year. Related: Iran’s Worst Nightmare Is Coming True
The City of Vancouver, the largest city in the province of British Columbia, has imposed a strategy to cut down on natural gas usage, which includes halting work at its gas-guzzling asphalt plant and turning down the thermostats at all buildings occupied by city-staff, with the exception of public spaces and libraries.
One of industries most heavily impacted by natural gas shortages is the agricultural sector, which uses large volumes of natural gas to heat greenhouses as well as to supply carbon dioxide to feed plants. The majority of growers in BC have what is called an “interruptible plan” with FortisBC, which has them pay a discounted rate in exchange for the utility’s right to stop service in an emergency circumstance such as the pipeline explosion, or during cold snaps when natural gas is a priority for other customers who need to heat their homes and buildings. While for the time being natural gas service has been restored to the agricultural industry, some growers are reportedly considering skipping this growing season altogether due to what is sure to be an exceedingly expensive winter.
Meanwhile, FortisBC is doing its best to find other sources of natural gas to make up for their own decreased pipeline capacity, and has reached out to TransCanada to maximize output of the Southern Crossing pipeline, while also urging their customers to minimize consumption in whatever way possible.
By Haley Zaremba for Oilprice.com
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The Enbridge line is coming back up to 80% capacity by mid-November. So that's not a 50-80% reduction in available gas - it's 20% in the worst-case scenario. But in fact it is much less, because pipelines hardly ever flow at their peak capacity.
Furthermore, this particular system serves not only southwest BC but also utilities and industrial customers in Washington State. And while that might suggest that demand for the gas on this system is even higher, the fact is that there are multiple interconnects that allow gas produced in northeastern BC and Alberta to reach the market.
So while it may be true that industrial customers might be more vulnerable to service disruptions since they are on interruptible service, it is also true that most of these companies, including major Washington-state refiners, are already back to full operations, and most pacific Northwest utilities have pulled back on asking customers to conserve.
This issue is already resolving itself thanks to redundancies in the natural gas grid, and the return of most capacity on the Enbridge system will further butters supplies. The author, not fully aware of how gas gest produced, delivered, and consumed, is simply writing click air, and getting OilPrice to play along.