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How precarious is the state of Alberta’s natural gas industry these days?

Just take a look at the City of Medicine Hat, proudly known as the Gas City, which has owned its own petroleum production arm for more than a century.

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Today, it’s producing about 6,500 barrels of oil equivalent (boe) per day from shallow natural gas and oil fields in southern Alberta and Saskatchewan.

The average cost of its gas production is about $2.78 per thousand cubic feet (mcf). The spot price for gas at the AECO hub closed Thursday at 80 cents per mcf, about $2 below U.S. benchmark prices.

You don’t need a sophisticated computer model to understand this gap means the city-owned utility has been hemorrhaging money.

Facing such economics — and an expected cash loss of $35 million this year from its natural gas and petroleum resources division — the city is throwing in the towel on the lion’s share of its producing gas wells.