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U.S.-Canada Natural Gas Trade Rises in 3Q2012

Natural gas trade between Canada and the United States was up in both directions in mid-2012, but it still had far to go to regain ground lost in the global economic recession, according to a scorecard kept by the U.S. Department of Energy (DOE).

In 3Q2012, Canadian gas deliveries into the United States increased sequentially by 5.6% to 795 Bcf from 752 Bcf in 2Q2012. Prices rose faster, according to the DOE's Office of Fossil Energy, which issues mandatory licenses for cross-border gas trade in all directions and tracks performance under them.

Canadian pipeline exports fetched an average US$2.60/MMBtu in 3Q2012 at the international border, up 23% sequentially from 2Q2012's low of $2.12. At the same time, northbound U.S. gas deliveries into Canada held firm at 219 Bcf in 3Q2012, down by a marginal 0.6% from 220 Bcf in the previous three months.

The slight drop in U.S. exports to Canada was more than offset by an increase in pipeline shipments to Mexico, which rose by 11.3% to 174 Bcf in 3Q2012 from 156 Bcf in 2Q2012.

International dealers in U.S. gas more than matched the price gains chalked up by their Canadian counterparts. U.S. exports to Canada in 3Q2012 fetched $3.06/MMBtu, up 25% from $2.45 in 2Q2012. U.S. pipeline exports to Mexico averaged $2.99/MMBtu in 3Q2012, which was 22% higher than the previous three months' low of $2.45/MMBtu.

However, the continental gas trade still looks bleak when the picture is painted between year/year comparisons of the first nine months of 2012 and 2011.During the first nine months of 2012, Canadian exports to the United States dropped by 4% versus the same period of 2011 to 2.3 Tcf from 2.4 Tcf.

Canadian exports lost value faster than their volume shrank during the slide. Average border prices for southbound deliveries into the United States dropped by 40% year/year to $2.49/MMBtu during the first three quarters of 2012 from $4.18/MMBtu. U.S. northbound export volumes held up better, hovering at 702 Bcf of pipeline deliveries into Canada during the first three quarters of both 2012 and 2011.

However, on the pricing front, U.S. gas merchants endured almost as much decay as their Canadian counterparts. U.S. exports to Canada fetched an average $2.83/MMBtu during the first nine months of 2012, down by 38% year/year.

U.S. pipeline deliveries into Mexico rose by 22% to 458 Bcf in the first three quarters of 2012 from 376 Bcf in the same period of 2011. The value of the southern trade, however, shrank as U.S. exports to Mexico averaged $2.74/MMBtu, down 37% to $4.37 a year earlier.

Overall, total U.S. imports of gas from all sources were down by 9% to 2.5 Tcf in the first nine months of 2012 from 2.7 Tcf in the same period of 2011. U.S. exports to all destinations rose by 4% year/year to 1.2 Tcf from 1.1 Tcf. Import prices were down sharply overall, averaging $2.55/MMBtu during the first three quarters of 2012 from $4.27/MMBtu in the same period of 2011.

Trade in liquefied natural gas (LNG) almost vanished. Tanker deliveries to U.S. ports sank by 52% to 133 Bcf in the first three quarters of 2012 from 277 Bcf during the same period of 2011. LNG exports from the United States plunged by 68% year/year to 18 Bcf from 57 Bcf.

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