A Bullish Outlook for Canadian and U.S. Natural Gas
This podcast is also available as a video on Youtube
This week on the podcast, our guest is Dulles Wang, Director of Americas Gas and LNG Research at Wood Mackenzie. Dulles co-authored the report Defying Gravity: Why U.S. Henry Hub Natural Gas Prices Are Set to Rise. He is also bullish on the longer-term outlook for Alberta natural gas prices (AECO).
The report comes as natural gas prices in the United States and Canada are depressed by abundant supply, especially in Canada, combined with an outlook for very warm winter weather.
Here are some of the questions Jackie and Peter asked Dulles: After years of low natural gas prices and abundant supply, why do you expect prices to rise? Is there a risk that supply could surprise again and continue growing fast enough to keep pace with demand growth, despite low prices? How do warmer winters affect the outlook, given that they appear to be becoming more common, including expectations for this upcoming winter? What is your outlook for Alberta natural gas prices and Canadian LNG exports? This has been a big year for M&A involving U.S. shale gas assets, with a new group of buyers that includes Abu Dhabi’s ADNOC, Saudi Aramco, and Japanese companies. What is driving this trend, and do you expect it to come to Canada?
Content referenced in this podcast:
- Mark Carney Forward Guidance: A Stronger Canada video (September 8, 2026)
- Wood Mackenzie report, Defying gravity: Why US Henry Hub natural gas prices are set to rise (July 2026)
- FT article, Scramble for gas assets pushes dealmaking to a decade high (August 30, 2026)
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Episode 337 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.
Peter Tertzakian :
And I’m Peter Tertzakian. Welcome back. Well, it’s only been a week, and, I don’t know, we got $100 oil. Next week is the prime minister’s Investment Summit in Toronto.
Jackie Forrest:
Yeah. We’re recording this on Friday, September 11th, but we’re going to release this at the same time that summit is happening.
Peter Tertzakian :
Yeah. So because I’m going to be at that summit, don’t think that I’m in two places at once.
Jackie Forrest:
That’s right. We’re recording early because Peter’s going to Toronto.
Peter Tertzakian :
We’re recording early, yeah. So, what do we make of all the news? We also have the government of Canada streamlining the project assessment, the impact it has-
Jackie Forrest:
And more trade war news.
Peter Tertzakian :
… in natural gas. And spoiler alert, we have a special guest for that, but we’ll get there. Where do you want to start?
Jackie Forrest:
Let’s start with $100 WTI.
Peter Tertzakian :
Yeah, it’s hard not to start with that.
Jackie Forrest:
As we’re recording, it’s $99. So maybe I’m exaggerating, but I’ll call it $100 oil.
Peter Tertzakian :
And the international prices, Brent, et cetera, are well over a hundred now. And that’s because the war in Iran has escalated, and also now spilled over not only from the Straits of Hormuz, but to the Bab al-Mandab Strait, with the Houthis taking control of strategic ports. And even this morning, the news is they continue to advance and will be able to control the strait. They’re already restricting Saudi tankers because that was the alternate route that the Saudis were taking, the east to west pipeline that went to the Red Sea, and then the exit was being ramped up. But now, all of a sudden, that looks like it’s part of the choke point as well. So, it’s no surprise we have $100 oil, in addition to the bombing of several Iranian tankers by the Americans and reciprocating actions by the Iranians on some of the strategic American military bases such as in Jordan, et cetera.
So the whole place is on fire, it just seems.
Jackie Forrest:
It’s a mess, yeah. Of course, we have the higher oil price, but what’s really making the news is what it’s doing to refine product prices. And of course, we talked about this before: refined product prices were already elevated because we lost a lot of global refining capacity. But now, with the high oil prices plus the fact that we have very low inventories for refined products, the US right now is seeing over $6 per gallon diesel pricing and gasoline is over $4. And so, this is getting into the area where I think we start to worry. Maybe not if this is sustained for a week or two, but if this is sustained over many months, I think it does create risk for some sort of economic slowdown. Especially when you couple it with inflation, not only from energy prices, but we might see in the next few months more inflation from this trade dispute as well.
Peter Tertzakian :
Yeah, these things tend to lag, and the $6 per gallon diesel is significant also because it’s harvest season. The farmers use a lot of diesel. And there’s a lag in terms of how the food crops get transported via semi-trailer trucks, which use diesel. Tractors use diesel.
Jackie Forrest:
Yeah. Diesel fuels the economy, right?
Peter Tertzakian :
And so, you tend to see a lag. So the inflationary numbers, I’m not going to make any specific forecast, but the bias is to the high side of inflation as we head into winter.
Jackie Forrest:
Yeah. And I mean a $100 oil, you can say, “Oh, well, that’s sustainable.” If you go back to previous periods where we’ve had recession, we’ve probably gotten the financial crisis, over 140. But because refined product pricing is so much higher than normal, today diesel is reflecting maybe $140 or more oil price. So, I think we are in that red flashing zone in terms of the types of energy prices that can start to slow down economic growth.
Peter Tertzakian :
Yeah. And I mean, that’s the thing is that the old adage in the business where high oil prices cure high oil prices, low oil prices cure low oil prices. You get to a certain point and that there is an economic response switching as well. All sorts of things start to get triggered and the demand goes down. Other factors, basically, then bring it down.
But I don’t think we’re at the peak. The situation in the Middle East is pretty severe. Inventories are generally low.
Jackie Forrest:
Yeah, especially in North America and for refined products. I think the other thing that concerns me, of course we keep talking about this US midterm election, but we’re getting into a time period where you could have some bad policy, some political intervention that could be used to try to help the situation. And generally, as you say, high prices cure high prices, the market works. But generally when politicians get involved, it distorts things, and it has other unintended consequences that aren’t great either.
Peter Tertzakian :
Yeah. Okay, moving on to the Canada Investment Summit. I think we’ll leave that until next week. We’ll report on that because we’ll find out what has actually happened, and I’ll be there so I can give you the on-the-floor views of what happened in terms of my discussions with all the investors there. The trade war with the US keeps escalating, although there seems to be a bit of a quiet lull after Canada’s retaliatory tariffs.
We shall see what happens. This is certainly not over.
Jackie Forrest:
No. And Mark Carney released his new Forward Guidance video this week, so we could put a link to that.
Peter Tertzakian :
Yeah, that’s for-
Jackie Forrest:
But he emphasized the importance of trade diversification. And as we said last week, if there’s anything good that can come out of this, hopefully, it is that Canada can build that infrastructure. And in that video, he talked about in the 1890s, a similar event happened and we diversified our trade. And then, let’s do it this time as well.
Peter Tertzakian :
Yeah, worth a listen. Now, speaking of listening, I don’t know how many people were listening because there’s so many big picture headlines, but on September 9th, there was an announcement by the government of Canada to streamline project assessments.
Jackie Forrest:
Yeah. And I think this one got missed. I mean, another big news, not related to energy exactly, but this whole “AI is going to kill us” all thing this week.
Peter Tertzakian :
Oh, that one.
Jackie Forrest:
That distracted me quite a bit. But I did notice, maybe it distracted our listeners, but governments of Canada streamlines project assessments. So, remember the Bill C-69? Sometimes called the No More Pipelines Act we all love to hate? That is really, officially called the Impact Assessment Act process. And there was a list of projects that had to go under it no matter what, and they changed that list. So, they removed the need for in situ oil sands projects and fossil fuel power plants, so mostly natural gas power plants. They can now fall under a more simple process. And power lines and pipelines will now also follow a different process. So, there’s still some federal oversight with the CER, but getting it away from that assessment act, which nobody liked, and proponents felt that it was long and risky.
So, we’re expecting some other changes to the environmental review process. These were not through legislation, these changes, but we’re expecting some new legislation as well. And there were some consultations that ran through the summer. And so we’ll see some draft legislation, we think, this fall, on that. So, we’ll be talking more about that as we learn more. But I think this is all in this whole, we got to move faster, we got to get projects done, we got to reduce the risk for those investors that are coming to Toronto to show them that Canada can build projects in a way that the environmental assessment is quick. They can de-risk their projects and feel comfortable investing here. So, I think these are all positive changes.
Peter Tertzakian :
Yeah, so we’ll follow that. I think we should follow AI thing as well. I mean, AI is just making such an incredible impact on things like productivity.
Jackie Forrest:
Next week, we’re actually going to talk more about AI, not so much about productivity improvements, but just in terms of the picture here in Alberta, the number of projects coming. And some of the things the Premier’s talking about in terms of opposition and how she’s answering some of those questions people have. So, that will be next week.
Peter Tertzakian :
Yeah. Well, that’ll be good because there’s a lot of negative opposition that is building against these data centers and AI in general with these rogue agents in that Hugging Face incident, if you followed that, where the rogue agents basically teamed up. And as a side note, I don’t know if the choice of the word agent, I think in retrospect, was a poor choice with like secret agents doing devious things, but that’s what they’re called. And they’re like these rogue operations that exist within the artificial intelligence cloud, we’ll call it, that basically club up and work together in a devious way and take over things. I mean, it’s just fascinating on one hand and terrifying on another. But without passing judgment, there’s no question that this incident is just amping up the anti-AI, anti-data center lobby here in North America. So, we’ll talk about that as well next week.
Jackie Forrest:
That’s something for week, but related to AI, one of the value propositions for coming to Alberta is our cheap natural gas. And certainly, it has been very cheap.
Peter Tertzakian :
It’s basically free.
Jackie Forrest:
Year to date, we’re at a $1.50 Canadian per gigajoule. Just incredibly low. And there was this hope that LNG Canada was going to come on last summer and that suddenly, over… Not suddenly, but over the next year, we would start to see better gas prices. But that hasn’t happened. And now, we’re talking about a super El Nino. Now, that’s like a very, very warm winter. So, not good for skiers or natural gas producers, I think, in North America.
So there’s a lot of negative sentiment on natural gas, certainly in the near term.
Peter Tertzakian :
Let’s put this in perspective and then we’re going to bring on our special guests. It’s $1.50. It’s called the AECO Hub in Southeast Alberta. But up in Northeast B.C., up in the north, it’s like 50 cents today or something like that. It’s just free. Just put it in perspective, the global market for natural gas, I think we’ll talk to our guests and find out, but it’s like 20 or $30. The reality is it’s basically a byproduct.
But let’s get into it. Let’s invite our special guests we are delighted to have with us, Dulles Wang. He comes to us as director of the America Gas and LNG Research at Wood Mackenzie, the big consultancy. Welcome, Dulles.
Dulles Wang:
Thank you very much, Peter. And thank you, Jackie, for having me here.
Jackie Forrest:
You made my summer a little bit happier, was I was looking at this $1.50 gas per… And actually this summer at times, AECO was even like a dollar. And then came your report titled Defying Gravity: Why US Henry Hub Natural Gas Prices Are Set to Rise. Of course, you didn’t talk about AECO, but we’re connected to AECO, so it gave me some hope.
So first of all, tell us about your report. What has the response been and why did you release this? Because I know Wood Mack, often, most of your reports are for your clients. Why did you decide to make this more widely available?
Dulles Wang:
Yeah, great question. First of all, I think this report actually came at the perfect time because we were looking at a lot of LNG development in the US that are indexed to Henry Hub. And a lot of LNG developers, as you may imagine, would like to have stable Henry Hub prices forever, but that hasn’t been the case. And I think that’s one of the things we actually wanted to release to the public because we do have a differentiated view, especially when you look at the foreign markets. If you’re looking at the NYMEX, looking at 2030, 2035, the prices are actually stable forever. So I think for us, having a differentiated view is something that we want to actually tell clients, because at the end of the day, we actually think the market is changing. We’re actually talking about a natural gas market that’s moving into a new paradigm. We’re no longer talking about a supply push market. Now, we’re talking about a demand pull market. And to us, we think that’s a really strong message that we want to give it to our clients, even if you’re not subscribing to Wood Mack services.
Peter Tertzakian :
Okay. So, let’s get calibrated here for the audience that is not natural gas fully literate. Henry Hub is the big hub in Louisiana. That’s where the main prices are set because that’s where a large volume of gas is traded. And then from that trading price, it goes to the Gulf Coast. It’s the gas, it’s liquified, loaded on the tankers and sent out. So, these are the LNG. And I don’t know, it was like a decade ago there was hardly nothing.
And now, what percentage of the US mark production is going out as LNG? I think the US production’s about 120 bcf a day now.
Dulles Wang:
Yeah, somewhere up there.
Peter Tertzakian :
And how much is going out? 20?
Dulles Wang:
Looking at like 18, 19 bcf a day.
Peter Tertzakian :
Okay. So, it’s one-sixth. Whatever that is, 17% or something like that?
Dulles Wang:
Yeah, definitely. That was over the last 10 plus years, and we expect that to actually double over the next 10 years.
Peter Tertzakian :
Okay. So, it’s going to double. We in Canada, we’ll talk about that a bit later here. LNG Canada too, Ksi Lisims, et cetera. But the demand pull is a consequence of what? Not to put words in your mouth or in your report, but obviously, the Middle East is impaired.
Dulles Wang:
Right.
Peter Tertzakian :
And the Europeans are running really short on gas in the immediate term for this winter. What is the demand pull argument for more LNG from North America?
Dulles Wang:
Let me actually maybe take a step back. When we talk about supply push and demand pull, what are we trying to say? So when we say supply push, our view has been that when you look at the last 10, 15 years, gas prices have come down quite a bit. And the reason for that has always been on the supply side. We’re talking about productivity gains, changes in fracking technology, completion, drilling technology change. We’re talking about a lot of the improvements happening to result in lower cost of supply, and producers have been actually pushing the gas onto the market and that has benefited the consumers quite a bit. And that change mostly has happened on the producer side. And we think that has changed in a way that maybe over the last 10, 15 years, you didn’t have a lot of visibility on the cost side of things because technology continues to innovate, you continue to see revolutionary technology coming online, cost breakeven continue to fall. That hasn’t been the case over the last five years.
Now, we’re talking about a relatively stable environment for costs. Actually, costs for gas in some of the basins have actually creeped up a little bit due to the trade war. Now, we’re talking about structural impact on the demand side that’s actually changing the way that we think about how price is forming in places like the Northeast, like the Permian, like WCSB. Because when you have more visibility or transparency around costs, what’s not transparent is probably how much we think demand will crystallize. And that’s why we’re thinking the market is actually moving from more of a supply push into a demand pull market.
Jackie Forrest:
So basically, you’re saying we’ve had a decade here where there’s been abundant cheap gas. No matter how low the price is, we seem to keep growing our production. And now, we’re moving to an era where the demand is going to grow quite rapidly, and maybe supply isn’t always going to be able to keep up the way it has in the past.
Dulles Wang:
That’s absolutely right.
Jackie Forrest:
And therefore, higher prices. And I think your price outlook was $5 by 2035. That’s constant 2026 dollars. So, how does that compare to what we’ve lived with at Henry Hub for the last three years, let’s say, or the average price over the last while?
Dulles Wang:
Right. Definitely, I think over the last three years, five years, we’ve seen Henry Hub prices averaging something like 2, or 3.50 to $3.75 per MMBtu. We actually saw $6 gas back in 2021, 2022 due to the storms. But prior to that, taking it outside of the COVID period, it was sustained. Above $5 prices was back in 2010.
Peter Tertzakian :
So as someone who has personally studied this, I don’t know, for 30 years, the North American grid interconnectedness of Canada and the US 25 years ago, it was like, “Oh my God, we’re running out of natural gas.” Then all of a sudden, horizontal drilling and fracking came in, and we realized that there was just a tremendous abundance of gas, and our ability to liberate that gas at progressively cheaper and cheaper prices bottled up our gas in North America because there was no outlet to participate in the international markets. Now, that’s happening. We just did the back-of-the-envelope calculation about 17%. Maybe 20% of North American natural gas with the Canadian LNG exports as well is able to get out.
You’re saying that as we develop more LNG exports, North American gas participates with the global, higher price gas. As we said earlier, it’s like 20 times the price of Canadian natural gas. And so, that’s to the benefit. So does that offer, first of all, a summary of the big picture?
Dulles Wang:
Yeah, definitely. I think that’s a great summary.
Peter Tertzakian :
Okay. So because we’re talking about the long-term outlook, meanwhile we have the Middle East, we could argue is partially impaired, at least for now. But there’s this sort of sub story going on when South America with, all of a sudden, even Venezuela, Argentina, and Trinidad, et cetera, that are all looking to expand their pretty impressive hydrocarbon reserves, including natural gas. How does that factor into it as well?
One of the things with a new technology and drilling over the course of the last two, three decades, especially the last 10 years has been pretty phenomenal, is that there’s no shortage of gas in the world. There’s no shortages. It’s just trillions and trillions of cubic feet. And now, our ability to liberate it has gotten better and better. And so how do you think about these other sources of supply coming in? Just as you think the price is going up and, all of a sudden, more supply comes on?
Dulles Wang:
For sure. I think this is actually the kind of analysis that we’re trying to bring out to our clients in a way that globally, where we see LNG supply coming up, that we can scale in large quantities. There are really two regions to do that. One is Middle East, the other one’s the US. You mentioned Argentina. You mentioned Trinidad. Trinidad volumes are actually declining. Australian volumes, they’re relatively stable, but nobody’s going in there to do more projects. I think this is where we’re talking about places that it’s probably looking at incremental volumes coming online. Argentina is looking to FID their LNG projects by the end of the year. We’re talking about smaller scale FLNG projects in Mozambique, parts of Papua New Guinea, but those volumes are incremental. And when we think about projects that are under risk with the Iran war, we’re talking about taking down supply that’s probably right now, I think it’s 14, 15 million ton of projects is offline due to the war.
And if the Strait of Hormuz does not open up, we’re talking about, potentially, 50, 60 million ton of projects essentially that could be taken off the market due to the lack of the flows. That compares to, say, LNG Canada: phase 1 is 14 million ton, phase 2 is 40 million ton. You need a lot of these projects to actually make up for the volumes, and that’s just to keep it whole. And then you think about all the demand growth that could be happening. We’re talking about the fact that if the Middle East volumes don’t come up, if we continue to see risks around, say, Russia supply because of the ongoing sanction from the US to Russia, where do we see some of the risks coming online, we actually think potentially the price could actually go up globally.
Jackie Forrest:
So you’ve convinced us that globally, maybe there isn’t a big source like US. Of course, there’s Canada, and we’re hoping we’ll come to Canada in a bit. But what about North America supply itself? So one of your thesis is that we’re at the end of the cheap gas era here in North America. But in the Permian, there’s a lot of associated gas with the oil, and some people think that as you develop the Permian more, there’s going to be more gas come from it. The problem with that gas is it gets produced at any gas price because people are producing it for the oil. I’ve also heard there’s a lot of dry gas in the Permian region that hasn’t even been tapped yet.
Marcellus and Utica, the theory there is you can’t build pipelines out of that region. But of course, if there were high gas prices, couldn’t the government policy be that we’re going to build pipelines even though people don’t want them, right? So, is there a potential for us… And Peter and I were talking about it. For the last 10 years, we’ve always been like, “We’re only a couple of years away from good gas prices.” And then supply always surprises us.
Dulles Wang:
Right.
Jackie Forrest:
It’s like could we still have a surprise here in North America where the supply surprises us and continues to grow at low prices?
Dulles Wang:
Right. So our story isn’t really straightforward. We’re taking different turns right now. One of the things we want to highlight is the fact that supply costs, we think, is relatively stable now. And going forward with the depletion of low-cost inventories, you’re looking at increasing in cost of supply. The other aspect of it that we didn’t talk about a little bit, but it’s about the financial discipline of these producers. So, it’s not just a story on the geology. It’s the story, also, about financial discipline, and how publicly listed companies have been very much about restricting supply growth to maintain a relatively healthy level of cash flows and returning values to shareholders. And to us, I think that’s the other changing factor. It’s probably different from 10, 15 years ago when we saw, essentially, just Atlas cash being thrown into supply to try to grab the market share.
Now, coming back into the Permian and the Northeast, there are two different dynamics, which is actually… And then probably, I’ll throw in, I think the Permian story here is we definitely think Permian still has a lot of inventories, a lot of ground to grow. It is very much oil-driven. It’s the gift that keeps giving, because now we’re seeing tons of new pipeline projects coming out online into the Permian. Permian prices earlier this year was lower than AECO. But now with more Permian pipeline projects coming online, definitely a great story when we compare it to Western Canada, more pipelines, better prices. But at what point do we think Permian actually start running on gas economics if Waha prices go from a dollar to $3? So, that’s one of the things we’re watching really closely is can we think about Permian moving from an associate place, Jackie, like you mentioned, is free gas. Where if gas prices are moving up, could we actually think about non-associated gas or non-associated supply coming online because of the strong gas prices they’re seeing in Waha. Which actually, would upgrade Permian gas production.
Peter Tertzakian :
Sorry. What’s Waha for our-
Dulles Wang:
Sorry. Waha is the gas production in Permian.
Peter Tertzakian :
For our audience.
Dulles Wang:
West Texas.
Jackie Forrest:
It’d be like our AECO price, but they’re kind of their pricing hub.
Dulles Wang:
There we go, yeah. Exactly.
Peter Tertzakian :
Okay.
Dulles Wang:
So, that’s Permian. Let’s talk about Northeast because that’s the other area that’s perpetually constrained. There are two things to talk about in the Northeast. The first thing is lots of local demand is being proposed due to data centers. We’re talking about the fact that given the push or the great interconnection constraints, we talk about power to the market, we talk about concerns around public domain of the electricity prices. You’re pushing a lot of the data center projects behind the grid, so we’re talking about the behind-the-meter projects. And most of these projects are sited near production centers to take advantage of low-cost gas, which offers a source of readily available demand growth that’s in your basin, that you don’t even need a pipe to bring the gas out. And that benefits places like Waha or Permian, places like Western Canada, with projects that we’re seeing, as well as the Northeast. So I think that’s one source of demand growth that’s supporting supply growth in the region.
Peter Tertzakian :
So, that’s domestic. But internationally, prices are so high now. We have to talk about this. The propensity to switch to renewables for the power market is pretty compelling. Natural gas, the traditional buckets of demand are heating, industrial for petrochemicals, things like that, commercial application. And then there’s power, which is, I don’t know, in North America, it’s about a quarter. I haven’t looked at the numbers lately. But that’s a significant amount of gas demand, and even globally. And you look at places like Southeast Asia, Europe and places like that, they go, “Okay, I can’t handle this high power prices.” It’s just a no-brainer to throw up solar panels, and even wind turbines and other sorts of things. And now with batteries becoming cheaper and cheaper, especially over the longer term, isn’t it fair to say that the combination of high prices and just scarcity of power just triggers the whole renewable acceleration, and just clobbers the power demand for gas?
Dulles Wang:
Absolutely, Peter. I think that’s a great point, because you brought up the point of a high prices cure high prices. And that’s exactly what we’re seeing or what we’re actually looking into as risk factors for our gas demand because we’re talking about gas prices in Asia that’s above $20 revenue to you. When the Iran war broke out, a couple of countries declared energy emergency right away. What we have seen over the last six months is actually not renewables, but the ramp up of nuclear, the ramp up of coal. Lots of companies are now restarting their coal.
Peter Tertzakian :
Yeah, that’s interesting.
Dulles Wang:
Right? So, you’re talking about energy emergency or energy reliability. And if you can’t get it from gas, they will switch. Now the question is, is that going to be a temporary switch or is a permanent gas demand destruction?
Peter Tertzakian :
Because the switch to coal back and forth, coal is what I would call a regressive transition that’s happening. I view that as if you start installing solar with renewables. I think that’s permanent.
Dulles Wang:
For sure.
Peter Tertzakian :
Isn’t it what you say, Jackie?
Jackie Forrest:
I think it is, but I think it’s a matter of can you replace all your needs with that? I think at the margin, the outlook for LNG is probably not as strong as it was before the Hormuz crisis, but there’s still going to be a need for a lot, considering the fact that maybe the Middle East supply is not as readily available as you thought. So, yeah.
Peter Tertzakian :
I’m just looking out at-
This is a report about the long term, which is great. But over the long term, combination of high prices, new technologies, new technologies even being accelerated with AI, engineering, I just see the renewable plus battery really making a much bigger impact on natural gas global demand.
Dulles Wang:
Maybe I can unpack a couple of things for you here?
Peter Tertzakian :
Yeah.
Dulles Wang:
One of them is not all the countries have all the renewable resources that we have in Canada and the US. So we’re talking about, potentially, solar winds not being applicable in places like the Southeast Asia. The second thing is we’re not just talking about organic demand growth. We’re also talking about indigenous decline in supply for the gas market. Especially when you consider some of these countries have been relying on gas and they’ve already built out a whole downstream of activity or industries around gas, switching all of that into renewable isn’t…
Peter Tertzakian :
I hear you, but you cross a threshold of price and you start thinking differently. And I think we’re there. I don’t follow your other thing.
Jackie Forrest:
That’s a good point. The Southeast-
Peter Tertzakian :
Are you saying that the sun doesn’t shine in Thailand?
Jackie Forrest:
They don’t have very high capacity factors for wind or solar, so they have to build big projects and don’t get much power out of them. A lot of people don’t recognize that about Southeast Asia.
Dulles Wang:
And maybe this is where I can plug in for what Mackenzie, we do provide long-term gas price forecast. Yes, gas prices are high right now. How long do we think the gap is going to stay high?
Jackie Forrest:
All right. Dulles, I want to come back to the supply side because it’s always surprising us. And you had talked about the fact that the Permian, there could be some gas there, and now you got me worried that we’re just going to build gas plants right in the Northeast. So, all of those things made me think that supply could grow more than we think. So, you must believe fundamentally that there are supply limitations here if you think price can be sustained at $5.
Dulles Wang:
Yes. Yes, definitely. A couple of things to talk about. One is we do think the growth of associated supply is decelerating over time. As you start running out of your low-cost inventories, just how much more can you bring out on the associated front? To us, we think that’s slowing down. The second thing is low-cost inventories, in the best acreage in the Northeast, in the Haynesville regions, are also laying out, and producers are definitely changing in terms of behaviors. What’s driving the growth is no longer just from publicly listed companies. Now, we’re talking about different buyers coming in. One of the stats that we have is if you think about Haynesville, now it’s owned… A third of the production is owned by the Japanese. And for them, I think a lot of the dynamics are relatively different than when you think about, say, PE-backed producers, when you think about publicly listed producers.
So to us, that production profile has changed a little bit as well. So for us, we do think the story of low-cost inventory running out, resource exhaustion will actually push the costs up. And that’s where we become more confident in our gas prices.
Jackie Forrest:
Okay. One quick question on that because Wood Mackenzie also put out a bit of research, which I will put a link to, that showed that upstream gas acquisitions in the US are over 30 billion so far in 2026, twice last year’s total. And some very interesting groups like Abu Dhabi ADNOC, are buying US upstream assets, Saudi Aramco. Japanese, as you just said. I just heard the Azerbaijan Republic executed some sort of letter of intent to acquire part of a US company.
These are very different buyers. What’s driving that, and could that come to Canada? We haven’t seen these type of buyers in Canada, yet.
Dulles Wang:
Right. I think it’s coming for a couple of reasons. But coming back to your question, why do we think that’s happening? In our view, that’s because we think demand growth is happening in North America. We think gas prices are rising, and a lot of these producers are probably buying into it. If you think prices are going up, maybe it’s a way for you to participate in the market and enjoy, probably, better prices over time. We do think there’s probably a bit of that. If you’re into the higher gas prices over time to come, maybe it’s the time for you to get in now and enjoy prices.
Peter Tertzakian :
I think those actors really were looking to diversify away from the Middle East and come here. I think that they just realized the concentration of investments in Middle Eastern assets, which is now, obviously, outright impaired in some instances. It’s just a diversification play. Are they buying here not so much for the gas, but for the liquids, the high-value liquids that are blended in with the gas?
Dulles Wang:
Yeah, we do think it’s a little bit of both. One of the things we mentioned is Japanese. Given their exposure with US LNG exports, we do think getting the upstream assets is a way for them to hedge their exposures, especially if you think Henry Hub prices are moving up. So to us, that’s one of the things.
Peter Tertzakian :
Yeah, but I think that this is also relevant in the sense that the international players, they come into North America, and in the extreme case, Canada. They buy natural gas for a dollar a gigajoule and then they go and sell it for $30 somewhere else. They capture the massive margin, right?
Dulles Wang:
You’re absolutely right. And I think this is where we have seen quite a lot of the LNG export activity picking up. And one of the reasons why we think Canada is next in line, and why we think the deals are probably coming or they’re being worked on right now, Canada is one of the few jurisdictions that we cover that offer a number of things. One is scalability of the resource, reserve life. We’re also talking about access to export markets, which is something that we’re developing. We’re talking about stable political environments, which results in more of that regulatory regime stability. All of these things, we think, is following the trend of the US market. So if we’re talking about increasing LNG exports, we actually do think probably more deals can be done, similar to the deal that we saw Shell acquiring ARC.
Jackie Forrest:
Okay. But why aren’t they here yet? Is it because they don’t have line to sight of more LNG projects? Do we need the LNG projects to be final investment decision? Do you think they’d come then?
Dulles Wang:
Definitely, definitely. I think one of the signposts, especially from our track foreign capital, will likely be more LNG projects. So you’re more connected, or better accessibility for international buyers to access the Canadian gas, as Peter mentioned.
Peter Tertzakian :
Moving on here, climate change, super El Nino, how do you factor all that in?
Dulles Wang:
Interesting question, because as you know, the gas market resets every winter. Whenever we have a warm winter, two things happen. It really brings down gas demand and then you have less winter freeze off risks on the supply side. So definitely, barriers factors as a whole on your gas prices. So the question then, I think, is more interesting to me is Northern Hemisphere winters are relatively correlated. If we have a warm winter here, are we going to see warm winter in Europe as well?
So coming back to the question of 20-plus gas prices in Europe, if we have a warm winter and if warm winter also happens in Europe where they actually have very low inventories right now for their gas, will they be able to sustain that $20 gas?
Jackie Forrest:
So the last, I don’t know, five, six years, it seems like we’re just getting more warm winters. And so, does that affect your bullish thesis if we continue to get these warm winters? Because even if we’re exporting a ton to international markets, if we get a warm winter and we hit the top of our inventory levels, we kind of disconnect from international prices at that point and we get low prices here. Is that a risk to your future outlook?
Dulles Wang:
Definitely. Definitely, is a risk to our future outlook. But at the same time, we also don’t have clear visibility on all the warm winters going forward. So, I think over the last couple of years, what we’re seeing is over the winter time, yes, winter is getting warmer but it’s also getting more volatile. We’re seeing more risks around extreme weather events. And we think that’s probably something that the market needs to grapple with is better reliability, which means probably more storage infrastructure, more pipeline infrastructure, more winterization on your upstream production, especially in southern markets like Texas or Louisiana.
So those are the things where we’re probably transitioning, not just looking at the weather patterns but also the type of weather patterns we’re looking at.
Jackie Forrest:
Okay. Let’s come to here in Western Canada where we have had a lack of volatility. We’ve just had really terrible prices for a long, long time. Like I said, $1.50 so far this year. How do you think that’s going to change with West Coast LNG by 2030? Let’s say, we get all FIDs and we get… The number we keep saying is potentially 6 bcf per day of exports in the early 2030s. Is that enough to help our prices? I mean, some people say yes, and some people say, “We got so much gas that we’ll just fill those LNG terminals and we’ll have low prices again.”
Dulles Wang:
Right. No, that’s a great question. For us, we do think we’re relatively bullish, AECO prices. We do think AECO prices, by 2030, which is probably in a couple of years, we’re looking at probably 2.50 to $3, and this is US dollars per MMBtu in real term. So, we do think gas prices are moving forward. Now in the near term, we think the tipping point or the inflection point probably happens around the end of ’27 going to the ’28 period with fiber LNG coming online. We think with data center projects coming online in Alberta around that ’29 period, it will probably continue to strengthen and bring on more demand. Some of the, probably, more upside risks on demand with oil pipelines being proposed and what you mentioned about the more streamlined regulatory framework, are we going to see more oil sense projects coming online? Those are probably risks around that early 2030 timeframe.
And that’s when we start to think about the second phase of LNG Canada, LNG Canada coming online around the early 2030s, and Ksi Lisims. So to us, we think now we’re probably finally becoming a little bit more optimistic. To answer your question about supply, why don’t we expect supply will just come online freely at low gas prices? A couple of things. One is we have seen quite a bit of consolidation on the producer front in Western Canada. With that, we do think producers are exercising capital discipline. So, very similar story to what we mentioned about in the US. So for us, we think the willingness for these companies to grow is something that we’re watching really closely.
Jackie Forrest:
Okay. Well, you talked about a lot of bullish things. First of all, $3 gas, everyone. That’d be very exciting. I think you said US dollar.
Dulles Wang:
Yeah, exactly.
Jackie Forrest:
So, that’s probably $4 Canadian. I’m sure a lot of people are excited to hear that, although skeptical because you said it was two years away, and we’ve been saying that for a while.
Dulles Wang:
That’s true. That’s true.
Jackie Forrest:
An LNG Canada startup was supposed to cause stronger prices and we haven’t seen that yet. But I wanted to talk about that oil sands thing because we’re focused on data centers and the green light, when the announcement came out, they talked about 0.15 BCF per day of additional demand. But a million barrels of in situ, how much gas demand does that represent? Additional gas demand?
Dulles Wang:
So for us, I think we’re talking about… That’s probably around 0.5 to 0.7 bcf per day. So, there is quite a…
Jackie Forrest:
So, it could be much bigger.
Dulles Wang:
Yeah, definitely. Could much bigger.
Peter Tertzakian :
Actually, you need to build a lot of data centers to make a difference.
Dulles Wang:
Yeah. Our-
Peter Tertzakian :
It’s like 150 million cubic feet a day for every gigawatt, which is your 0.15.
Jackie Forrest:
Yeah, with 0.15. So oil sands, talking about a million barrels of oil sands is much bigger. Like, 7 bcf, right?
Peter Tertzakian :
Does it? Yeah, but then this is a very complicated dynamic because then there’s all the diluent that you need to thin the oil sands, heavy oils. And so, you start drilling for the high-value diluent. And natural gas, again, becomes a byproduct.
Jackie Forrest:
Yeah, there’s certainly lots of variables here.
Peter Tertzakian :
There’s a ton of variables, but I mean here, it’s been great. We’ve talked about supply, we’ve talked about demand, but we haven’t talked about what’s in between. What connects the two? And the ability to build infrastructure, including pipelines, to be able to handle more supply to meet more of a demand. In Canada, for example, the Natural Gas Transmission Line, the NGTL, needs additional investment. TC Energy, I believe, is coming out and saying it’s going to do some more investment, but that’s probably dependent upon tolls and a bunch of things.
Whatever happens, there has to be some synchronicity between the supply, and the demand, and the infrastructure that connects the two. How are you thinking about infrastructure here, and even in the United States, as it relates to all this?
Dulles Wang:
So the way that we think about it, and I think Peter, you’ve raised a really great question of supply-demand and the role of pipeline. And this is one of the things we’re seeing changing in the US, we’re seeing changing in Canada as well, which is demand is coming to supply. Demand is chasing after supply. We’re talking about data center development. We’re talking about LNG projects. If you think about it, they’re probably siding them closer to supply than ever before, especially with these data center projects. So for us, that probably eases the need for pipeline projects because you’re no longer talking about green field or, even more expensive, brown field projects on long haul. Just like long haul pipes. That’s one of the things.
The second thing, probably on your point, is the need for storage. Because I think one of the things that we’ve been tracking and we continue to add into our model, or just looking at the forecast of the market, is an increased need for storage over time. We’ve seen that happening in the US Gulf Coast region. We’ve seen that pockets developing outside of the US. But with volatility, we think, especially with LNG Canada, with more LNG, more data center, that is also something that’s crucial in maintaining or containing the volatility of prices.
Peter Tertzakian :
Let me challenge you a little bit on that because storage right now is, I don’t know how many bcf above the five-year average, both here and in the United States.
Jackie Forrest:
I mean, our storage is very small, though.
Peter Tertzakian :
And it’s sort of a recurring theme. The five-year average is sort of like the benchmark we use, but that five-year average keeps moving up every year. And every year, it seems to exceed it. And then in my mind, we have become so good at drilling technology that storage becomes the reservoir itself. “Okay. You need more gas, we’re running a little short. Price is good. Go drill another well.” Boom. You get another five million a day just for the one well, five million cubic feet a day.
Dulles Wang:
Right. I think I will counter that in a way that if you think about it, I think over the last couple of months, what we saw LNG Canada, I think for a couple days run down, what happened after that was you immediately saw a surge in storage injection. That wasn’t enough to contain all the gas that was going to LNG Canada, but you couldn’t absorb that in storage. Prices came down. And as they tends to coming down, producers started shutting in.
So, I think the scenario that we’re envisioning is if you have more storage, more space for you to put the gas, you may not need the producers to run your production using, essentially, wellhead as the storage for that. So. I think that’s where we’re thinking about the value of storage is coming in, especially on those days when you see volatility on the demand side.
Jackie Forrest:
And I was looking at our storage, actually. The difference between average and hitting the tank tops is only like 75 to 100 bcf in Western Canada. That’s not a lot-
Peter Tertzakian :
No.
Jackie Forrest:
… considering the size of these projects. And like you say, the ability for them to go offline for three, four days, or maintenance period. So argument for more storage, although it seems like we don’t have a lot of volatility, but when we get there, we’ll need it.
Before we wrap up, I wanted to ask you a question around, do you expect a final investment decision from Ksi Lisims and LNG Canada phase two? And when do you expect it, if so?
Dulles Wang:
Nice. We do think LNG Canada phase two will probably reach FID by the end of the year. What we don’t have a lot of visibility on, and then this is one of the things we’re watching really closely, is Ksi Lisims. I think it’s really great to see Ksi Lisims recently announced EPC for their consumer pipeline projects. So, there’s probably more visibility on the cost side of things. We’re also watching how producers are working with them to participate in Ksi Lisims, because I think it’s awesome that they’re targeting a lot of the utilities in Europe to really help support the projects. At the same time, we’re also looking at producer response, because one of the things we’re also seeing as an emerging theme is producers are actually dishing… Not dishing LNG. That’s probably an overstatement. But they’ve been working a lot with Centrica or Vitol entering into supply agreements that’s indexed to TTF and JKM without actually going into LNG projects.
So if you’re a producer, if you’re thinking about monetizing your supply with global gas prices, you’re actually doing that already without looking at LNG or being part of LNG projects.
Jackie Forrest:
You can do it financially.
Dulles Wang:
Exactly.
Jackie Forrest:
Although, I would say that you just talked about, potentially, different types of companies coming in here, and they might have a big interest in physically moving gas to their countries. Right?
Dulles Wang:
Absolutely. Absolutely. So, we are watching very intently on how Canadian producers are supporting this project. Is it going to be the Canadian producers we’re seeing today, or is it going to be global companies coming in and acquire assets and then essentially use that gas, move them overseas.
Peter Tertzakian :
Let’s wrap up with a comment you made at the beginning, or near the beginning of this podcast, on costs and the trade war. So, what is the impact on costs with the trade war?
Dulles Wang:
So right now, what we’re seeing is costs creep up over the last couple of, I want to say, six to 12 months because of the trade war, because of the tariff that’s applied to a lot of raw materials and equipment.
Peter Tertzakian :
Like steel?
Dulles Wang:
Steel, exactly.
Peter Tertzakian :
And steel valves and that kind of thing?
Dulles Wang:
Exactly. So, those are the few-
Peter Tertzakian :
Steel pipes.
Dulles Wang:
Absolutely. Those are the things that we’re watching to see how costs are actually cost breakevens. Yes, producers are becoming more efficient. Their productivity gains are increasing. But when you start normalizing that on a production or a unit production basis, that’s not really going down. That’s actually moving up a little bit. So, that’s one thing on costs.
The trade war itself we’re watching is it drawing more diverse buyers coming into the market to offset trade surplus or trade deficit that you’re seeing in the US? So far, I think that’s been happening. I think you were talking about investments coming in from Japanese, from Korea. Some of the global countries coming in, they’re actually help supporting that with data center development. They’re building, or they’re supposed to be building, power plants in the US. So, it’s a way of growing your gas demand.
I think it actually helps with our case. Your demand is increasing and your costs are increasing. Maybe it won’t be $5. It’ll be $8.
Peter Tertzakian :
Well, it’s been a fascinating discussion, Dulles. As a veteran following the gas markets myself, I know I’ve been burned several times by making high gas price forecasts. However, there’s another adage out there, which is sort of like if you’re forecasting commodities, you’re right half of the time and wrong half of the time. Maybe it’s the day when we’ll be right half of the time, and your report will represent right half of the time.
So thank you, Dulles Wang, director, America Gas and LNG Research at Wood Mackenzie. It’s been delightful having you and giving us your perspectives on the gas market.
Dulles Wang:
Thank you very much for having me.
Jackie Forrest:
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