Say what you will about storage caverns bloated with gas and an oversupplied U.S. market; when the mercury dropped earlier this month, pipeline imports of Canadian gas as well as liquefied natural gas (LNG) from incoming tankers and terminal-based storage helped to save the day, according to analysts at Barclays Capital.

“In aggregate, net LNG and pipeline imports to the Lower 48 states jumped by 3 Bcf/d in January month/month, following a 1.9 Bcf/d increase in December,” Barclays analysts wrote in a note published last Tuesday. “While some seasonality in imports is in line with historical norms, the rapid response to increased consumption highlighted the flexibility of supply.”

Additionally, during the cold period the United States pulled back slightly on pipeline exports to Mexico, the analysts noted. As temperatures moderate exports to Mexico will return to normal, as will imports from Canada, the analysts said. However, the outlook for LNG imports for the rest of the year is less certain, they said. “…[W]inter weather in other parts of the world still has time to make a dent in global gas inventories and balances.”

During the cold snap, pipeline deliveries of Canadian gas to the U.S. jumped to more than 10 Bcf/d on the coldest day and averaged 8.7 Bcf/d in the first half of this month, Barclays said. This compares with 7.1 Bcf/d on average in December and 7.9 Bcf/d on average in January 2009.

However, imports from Canada aren’t likely to be charting peaks in the coming months as Canadian production is in decline. “Not only is Alberta’s largely conventional production coming from mature reservoirs, but the province’s royalty regime also remains punitive to new gas drilling,” the analysts said. “While there is a strong push from Canadian producers to enact change, there is no clear path for a policy revision yet.”

The analysts noted that British Columbia has been more friendly to producers on the royalty front (see NGI, Dec. 21, 2009); however, its production “would struggle to overcome the declines in Alberta.”

As for LNG, gas prices in the U.S. Northeast during the cold snap proved too enticing to resist for cargoes that had been headed elsewhere in the Atlantic Basin but were diverted, the analysts noted. “…[N]ot only did LNG sendouts by U.S. facilities increase, but they also set a new daily record of 4.4 Bcf/d. For the first half of January, LNG imports to the U.S. averaged 3 Bcf/d, nearly doubling from the average sendout of 1.6 Bcf/d in December.”

However, LNG will come to U.S. shores only if price differentials merit it, the analysts said. “In 2009 Europe absorbed nearly all excess spot LNG in the Atlantic Basin, but in the process its inventories filled to the brim,” the analysts noted. “At the moment Europe is also grappling with extreme cold, and the continent’s gas in storage is quickly being depleted.”

Additionally, weather in Asia also has been supportive of LNG demand, the Barclays team said.

But then again, they said, global LNG supply is poised to grow by more than 20% this year, which could thrust the Atlantic Basin into a state of oversupply. “Thus, contrary to the reversion in Canadian and Mexican net imports, the uptick in LNG imports could be somewhat resilient once winter weather around the world subsides,” they said.

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