The WCSB is set to experience the largest increase in natural gas export volume in its history. Liquefied Natural Gas (LNG) Canada is the first of a series of projects that should provide robust demand growth for Canadian natural gas through 2030. In aggregate, we see a path that should allow the basin to grow natural gas production by mid-single digits per year and support a higher-than-current price.
Our Thesis
We believe that the additional demand for WCSB natural gas from LNG Canada Phase 1 will largely be filled in real time through a combination of recent supply additions and existing pre-set growth plans through 2025. This will likely result in continued weakness in natural gas prices through year-end. However, with producer supply-restraint past 2026, we see a path to continued basin growth and stronger WCSB natural gas pricing.
We estimate that western Canada can grow natural gas production by approximately 1 billion cubic feet per day (5% year-over-year) in 2026 and maintain an Architecture, Engineering, Construction and Operation (AECO) price above our current 2026 assumption of US$3.00 per thousand cubic feet (mcf) reflected in our cash flow (CF) models. Longer-term (i.e., through 2030), we believe that the incremental demand will provide the basin with the ability to grow at a compound annual growth rate (CAGR) of approximately 5%. This sets the stage for improved equity pricing and robust returns for shareholders through the remainder of the decade.
What is Proprietary?
This report breaks through traditional sell-side dynamics of asset class, sector, and Research Analyst silos. The commodity analysis includes a TD Cowen proprietary, bottom-up supply/demand model for WCSB natural gas that integrates into a WCSB natural gas pricing model. From a sector perspective, this report relies on the expertise of six Research Analysts across North America (Calgary, Toronto and New York) covering six subsectors (E&P, Midstream, Integrated Oil, Power/Utilities and Energy Services).
The full report pushes past the pathway for LNG demand growth in Canada by exploring:
The supply/demand balance of global LNG out to 2030 (how does Canadian gas fit within this framework?);
The importance of Canadian gas supply to meet U.S. consumption;
WCSB producer growth and how these supply additions could impact WCSB natural gas prices;
In-basin demand growth from steam-assisted gravity drainage (SAGD) development and datacenters and
The timing and bottlenecks of meeting datacenter demand with incremental gas-fired power generation.
Financial and Industry Model Implications
We expect that LNG Canada is the first significant step towards steady demand growth for Canadian natural gas. In the near-term, we anticipate the ramp-up of the facility effectively adds a single customer responsible for approximately 10% growth to current WCSB natural gas consumption. Given limited incremental storage additions, it could result in higher gas price volatility (both up and down).
Over the medium-term, additional LNG export projects could reach approximately 7.5% of total global LNG supply by 2030. This, combined with steady growth of in-basin demand from both SAGD projects and natural gas fired power plants, will be supportive of WCSB gas prices if the basin can maintain a growth rate of approximately 5% per year or less (i.e. ~1 billion cubic feet per day (Bcf/d) per year) through 2030 assuming:
all key Canadian LNG projects that are currently under construction or proposed are ultimately built and
one-third of current proposed Alberta datacenter projects materialize.”
Our current target price calculations reflect a combination of trailing three-year average enterprise value/debt-adjusted cash flow (EV/DACF) multiples and net asset value (NAV) under near-strip commodity price assumptions. We believe that, over the next five-years, growing demand for WCSB natural gas should result in modest production, cash flow (CF) and free cash flow (FCF) growth. In aggregate, we see this as positive for equity prices – even before factoring the potential for sector multiple re-ratings.
We note that the upside scenarios outlined above are predicated on a natural gas price that is higher than we use in our current company forecasts. Our current company financial estimates are set approximately every quarter and are generally based on current strip pricing at the time (which is lower than the potential outcome described above).
What to Watch
Through the remainder of 2025 and early 2026, investors should be closely watching the speed that LNG Canada ramps-up and the volumes that producers are adding to the basin. A faster-than-anticipated ramp-up period (and/or slower-than-anticipated basin supply growth) would be positive for WCSB natural gas pricing, in our view; the inverse would be negative for WCSB pricing. Over the medium-term, investors should be watching for the timing of:
incremental LNG facilities that are either under development or approaching FID,
the pace that incremental power load indications are being converted into additional power (and natural gas) demand for the grid and
producer activity.
Investors should closely monitor producer capital budgets and multi-year plans to ensure that planned production growth rates do not exceed anticipated demand growth.