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NEB: Canadian Gas Continued Export Retreat

Canadian exports took falls on all fronts in the international natural gas trade's last contract year, according to records of the National Energy Board (NEB). Deliveries to the United States slipped by 10.7% in the 12 months ending Oct. 31. Prices dropped 49%. Revenues plunged by 54.5%.

The final tally of pipeline exports from Canada for 2008-2009 was 3.3 Tcf, down from 3.7 Tcf from the previous contract year. The slippage put an end to a 20-year growth streak that multiplied Canadian sales into the U.S. nearly four-fold from a depressed base of 993 Bcf at the 1987 onset of international gas deregulation and free trade.

By abolishing government border price and volume controls the policies ushered in a gas renaissance, especially in Alberta, source for more than four-fifths of Canadian supplies. With boosts from frequent pipeline additions, exports grew to nearly 60% of production in the strongest growth years. But the 2008-2009 economic recession and energy price contraction stopped the momentum cold.

The annual average price fetched by Canadian gas exports at the international border dropped to US$4.42/MMBtu in the 2008-2009 contract year from US$8.69 for 2007-2008, the NEB records show. Exchange rate trends softened the blow slightly. In Canadian funds, the price erosion was a milder 41% to C$4.89/gigajoule in 2008-2009 from C$8.27 in 2007-2008.

The one-two punch of volume and price losses gutted Canadian gas export revenues, cutting them by more than half to US$14.7 billion for 2008-2009 from US$32.4 billion in the previous contract year. Currency fluctuations eased the pain a bit for the majority of Canadian suppliers that convert their incomes into their home country's money. In Canadian loonies export revenues for 2008-2009 were C$17.5 billion, or a touch more than half of the C$33.1 billion in 2007-2008.

Last year export volumes and prices all suffered setbacks in three of the four major destination regions for Canadian gas shipped to the U.S.

California deliveries fell by 20% to 407.5 Bcf in 2008-2009 and the average price there for Canadian gas dropped by 46% to US$4.23/MMBtu.

Canadian exports to the U.S. Midwest shrank by 10.3% to 1.4 Tcf in the 12 months ending last Oct. 31, and the annual average price dropped 49.5% to US$4.36/MMBtu.

The volume slippage in pipeline exports to the U.S. Northeast was 18% to 964 Bcf, and the drop by annual average prices paid for Canadian gas entering the region was 49% to US$4.76/MMBtu.

The lone significant exception to the deterioration of the trade was a Canadian 2008-2009 sales volume increase of 16% to 538 Bcf in the U.S. Pacific Northwest. But prices on deliveries into the region stayed in line with the overall international trend, dropping the last contract year's annual average for Canadian gas by 50% to US$4.16/MMBtu.

Canadian exports to the U.S. Rocky Mountains region increased by 30% but total sales remained a minuscule 8.5 Bcf in 2008-2009 and prices in the region dropped by 59% to a severely depressed contract year average of US$3.34/MMBtu.

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