Canadian energy companies are increasingly turning to natural gas as oil prices weaken under pressure from U.S. trade policies and a shift in OPEC+ strategy. The move marks a significant change in direction for producers, especially in Alberta, who are seeking more stable revenue sources.
The price of Western Canadian Select crude has fallen sharply—from around $59 per barrel in early April to just $50 per barrel. However, the pivot toward natural gas began before that drop. In the first quarter of 2025, new drilling licenses for natural gas wells in Alberta jumped by 26% to 308, according to data from the Alberta Energy Regulator. This is the highest number since 2023. At the same time, oil well licenses declined by 24%.
The shift is partly due to global market pressures. Former President Donald Trump’s tariff-driven trade policy has disrupted international trade, while OPEC+ has increased production, pushing oil prices down. But a key factor is the growing potential of liquefied natural gas (LNG), especially with the upcoming launch of the LNG Canada project.
LNG Canada is a major joint venture involving Shell (40%), Petronas (25%), Mitsubishi Corp. (15%), Korea Gas Corp. (5%), and PetroChina (15%). Once operational, the facility will process 1.9 billion cubic feet of natural gas per day—over 10% of Canada’s total daily output, which stood at 18.1 billion cubic feet in 2024.
Tourmaline Resources, the country’s largest gas producer, has forecast that Canadian gas prices will improve once LNG Canada begins operations. The facility is expected to divert supply from the U.S. to Asian buyers, where demand is high. Originally scheduled for a late 2024 start, the project was delayed by poor weather. It received its first test LNG cargo earlier this month and aims to begin exports by mid-2025.
The timing may prove favorable. China has stopped purchasing U.S. LNG due to retaliatory tariffs, creating more room for Canadian exports. Other Asian nations remain major buyers, and forecasters expect demand for LNG to rise steadily in the coming years. This challenges past government claims that LNG had no viable business case in Canada.
According to Trevor Rex of energy analytics firm Enverus, many producers in the Montney formation have already begun shifting to gas, and some are also increasing production of condensates. These are light hydrocarbons used to dilute heavy oil from Canada’s oil sands. Demand for such diluents is expected to grow as oil sands output rises.
“We think condensate is a good place to be in the next few years as oil sands diluent demand ramps up,” Rex told Bloomberg.If Canada succeeds in scaling up LNG exports, it could rival top global players like Australia. Some estimates suggest the sector could eventually add up to C$75 billion annually to the Canadian economy.
With changing market dynamics and LNG infrastructure coming online, Canada’s energy sector may be on the cusp of a major transformation—one driven not just by policy, but by opportunity.
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