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Canadian Gas Exports Declined Last Year, Records Show

Canadian natural gas exports dropped last year as a faltering economy and rising U.S. supplies reduced overall reliance on imported natural gas, shows a trade scorecard kept by the U.S. Department of Energy.

Foreign production's total share of the U.S. market dropped to 13.1% in 2008 from an all-time peak of 16.5% hit the year before, reports the Washington, DC-based Office of Natural Gas Regulatory Activities, which issues import authorizations and tracks use of them.

The 2008 slippage was a rare significant drop in U.S. reliance on gas imports. The agency's records show that dependence on foreign supplies climbed steadily from 1% of U.S. consumption in 1959 to 5.9% in 1979, and has exceeded 10% since 1993. The import share of the U.S. market last year was the smallest since 1997. Most of the 2008 U.S. import reduction occurred in deliveries of liquefied natural gas (LNG). U.S. LNG imports fell by 54.3% to 352 Bcf in 2008 from a record 771 Bcf the year before.

Last year's tanker landings of offshore gas at U.S. import terminals were the lowest since total cargoes were 229 Bcf in 2002. But 2008 U.S. LNG imports remained well above the nominal levels where the trade remained for most of the previous decade.

The starting point for growing U.S. participation in the global gas market was LNG imports of 15 Bcf in 1995. By 2000 the volume grew 15-fold to 226 Bcf and it has not retreated below that level since.

The LNG share in total U.S. gas imports receded to 9% last year from a record 16% in 2007 after rising steadily from the token level of 1% in 1995. The 2008 drop was by far the steepest recorded by the energy department data, which shows that the LNG role in U.S. gas imports more than doubled to 13% in 2003 from 6% in 2002, then hovered in the range of 14-16% until last year.

The agency's gas trade scorecard for calendar years confirmed a trend previously recorded by Canada's National Energy Board (NEB), which uses the traditional contract year period of Nov. 1 through Oct. 31. The NEB has reported monthly slippage in Canadian exports to the United States since last spring.

In calendar 2008, pipeline deliveries to the U.S. from Canada fell by 5.3% to 3.653 Tcf from a record 3.857 Tcf in 2007. U.S. imports from its biggest foreign supplier have only dropped by even small amounts six times since 1982. The traffic has exceeded 3 Tcf per year since 1998.

A long growth wave in U.S. gas imports from Canada began in 1987, when the NEB abolished previous restrictions on exports by a decades-old "surplus test" regime that held up to a 35-year supply for forecast domestic needs off the international market. In an initial burst of rapid growth that included multiple pipeline expansions, Canadian exports to the U.S. more than tripled from 993 Bcf in 1987 to 3.052 Tcf in 1998.

"Volume-weighted (annual average) prices of Canadian imports, in inflation-adjusted (2008) dollars, dropped through the 1980s, held roughly constant in the 1990s, and began climbing in the latter part of that decade," The energy agency reported. "There have been up or down swings from year to year, but import prices have remained at an elevated level, compared with the last 20 years."

However, the inflation-adjusted trading range for Canadian exports of US$6-9/MMBtu since 2003 remains below the all-time peak approaching $11 hit in 1980-82. At that time, the federal government in Ottawa and the Alberta provincial government controlled border prices and set them at an energy-equivalent level to oil as it peaked following the 1979 Iranian revolution.

Excluding the mostly one-way commerce with Canada, strong U.S. supplies enabled the U.S. to chalk up an international gas trade surplus last year. U.S. exports to Mexico hit 365 Bcf in 2008, second only to the record 397 Bcf set in 2004. The combination of reduced LNG imports and strong Mexican sales made the U.S. a net exporter of 20.2 Bcf to non-Canadian gas trading partners last year, the gas regulatory office's records show.

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