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North America's NatGas Traffic Volumes Connecting U.S., Canada and Mexico Holding Up, Says DOE

The North American natural gas trade survived value destruction that ran parallel to the fall of oil on glutted markets during the first nine months of 2015, according to the U.S. Department of Energy.

Gas traffic volumes held up on the pipeline web connecting Canada, the United States and Mexico, even though surpluses cut prices by as much as 50%  at the international borders, a scorecard kept by the Energy Department's gas regulation division.

Canadian exports remained the largest trade item and even grew slightly. Deliveries to the Lower 48 states, chiefly originating in Alberta, were 2.03 Tcf, or 7.5 Bcf/d, in January through September 2015, up 1.1% from 2.01 Tcf, or 7.4 Bcf/d, during the same period of 2014.

U.S. exports stood out as the second-biggest and fastest-growing part of the continental gas trade, rising by 13% to 1.23 Tcf, or 4.7 Bcf/d, in first nine months of 2015 from 1.13 Tcf, or 4.1 Bcf/d, over the comparable time in 2014.

Unlike Canadian dealers, U.S. gas merchants diversified markets by continuing a trend of redirecting deliveries to Mexico, which emerged as the destination for two-thirds of U.S. exports. Pipeline deliveries of U.S. production to Mexico shot up by 40% to 764.5 Bcf, 2.8 Bcf/d, in the first nine months of 2015 versus 546.1 Bcf or 2 Bcf/d during the same period of 2014.

U.S. gas exports to Canada dropped by 11.9% to 512.6 Bcf, or 1.9 Bcf/d, in the first nine months of last year from 581.8 Bcf, 2.1 Bcf/d, in comparable period of 2014.

The U.S. continental marketing switch began following 2013 toll cuts on TransCanada Corp.'s gas Mainline trimmed costs of Alberta deliveries to competitive levels. But TransCanada and distribution companies in Ontario and Quebec are cooperatively adding capacity to resume rising imports of shale gas from U.S. Northeast, reflecting low-cost U.S. production and TransCanada's proposed partial conversion of the Mainline to 1.1 million b/d of Alberta oilsands service.

Surpluses burned value off every gas market on the continent last year. The average price that Canadian exports fetched at the U.S. border fell by 46.4% to US$2.98/MMBtu in the first nine months of 2015 from $5.56/MMBtu in the comparable period of 2014. The average price for U.S. exports to Canada dropped by 50% to US$3.28/MMBtu between January through September 2015 from $6.56/MMBtu in the same months of 2014.

U.S. exports go to the highest value Canadian markets in Ontario and Quebec, while Canadian exports go to more variable destinations across the Lower 48.

Prices for U.S. pipeline deliveries into Mexico fell by 38.2% in the nine-month period year/year to $2.97/MMBtu from $4.80/MMBtu.

The sporadic North American trade in small volumes of liquefied natural gas (LNG) followed global market trends. The average price of LNG imports into the United States dropped by 25% in first nine months of last year to US$6.97/MMBtu from $9.31/MMBtu in the nine comparable months of 2014. Prices for U.S. LNG exports to Japan and Taiwan fell by 52% year/year to average $7.61/MMBtu between January through September from $15.76/MMBtu.

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