CALGARY, Alberta/NEW YORK: Demand has jumped for relatively cheap Canadian natural gas, driving exports to the United States to three-year highs and prompting producers in Canada to boost capital spending and drilling activity.

Global natural gas prices have hit multi-year highs as world economies recover from last year’s slowdown during the pandemic. Now, natural gas stockpiles in Europe are dangerously low and demand in Asia has been insatiable, so utilities around the world are competing for liquefied natural gas (LNG) exports.

Canada’s gas is remote, and prices at the AECO hub in Alberta are among the cheapest in North America, with production far from major US demand centers and LNG export terminals in the US Gulf Coast, some 2,500 miles (4,023 km) away. Canada has no LNG export terminals.

Still, at around C$5 ($4.12) per million British thermal units (mmBtu), AECO prices are well above their 2021 year-to-date average of C$3.38 ($2.73), and some of Canada’s largest gas producers including Tourmaline Oil Corp are seeking to capitalize.

“A number of producers are accelerating capital into Q4 (fourth quarter) to add production volumes into the higher-priced winter market,” said Matt Murphy, an analyst at Tudor, Pickering, Holt & Co (TPH) in Calgary.—Reuters