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U.S. NatGas Trade with Canada Still Gaining

U.S. natural gas exporters are on course for a seventh straight record year for northbound sales, according to the U.S. Department of Energy's (DOE) trade scorecard.

Pipeline deliveries of U.S.-sourced gas into Canada rose year/year in the first quarter by 4.7% to 275.8 Bcf from 263.4 Bcf, according to DOE's Office of Natural Gas Regulatory Activities. The 2013 winter heating season performance by U.S. exporters accelerated from the year-ago pace that led to a full-year 2012 northbound sales record of 970.8 Bcf, up 3.6% from 937 Bcf in 2011. U.S. exports to Canada have more than doubled since 2007, when the unbroken string of record years in northbound sales began at 485 Bcf.

The first quarter also extended a trend of deterioration in Canadian exports to the United States since 2007, when buyers across the continent started replacing former mainstay supplies from distant Alberta with growing, competitive U.S. shale production closer to markets. In the first three months of this year, Canadian pipeline deliveries into the United States dropped by 4.4% to 750.3 Bcf from 785.2 Bcf in the same period of 2012.

Quarterly Canadian exports declined in the United States, extending the full-year 2012 slippage by 4.7% to 3.05 Tcf. Canadian pipeline deliveries across the international border have fallen by 22% since the southbound traffic peaked at 3.85 Tcf in 2007.

Canadian industry analysts, including federal and Alberta regulatory agencies, attribute the extended trade trends in favor of U.S. gas merchants to domestic conditions as well as the emergence of competitive U.S. shale supplies.

Changes inside Canada include natural depletion of aging conventional production fields, shaky prices and high costs that hold development of northern shale deposits down to experimental pilot projects, and rising gas use by thermal oilsands extraction plants in northern Alberta.

Both sides of the U.S.-Canada gas trade gained on one front -- prices -- during 1Q2013. The value of northbound U.S. pipeline deliveries across the border rose by 36.9% to an average US$4.02/MMBtu from US$2.94/MMBtu in 1Q2012. Canadian southbound exports fetched an average US$3.83/MMBtu between January and March, quarter, 40.8% higher (US$2.72) year/year.

U.S. gas merchants also scored gains in their smaller trade with Mexico. Southbound U.S. pipeline exports grew by 25.7% to 160.5 Bcf in the first quarter from 127.7 Bcf a year earlier. Prices also improved, with domestic gas exports fetching an average US$3.64/MMBtu in 1Q2013 at the Mexican border, up 32.7% from $2.75/MMBtu in the year-ago quarter.

While industry and public attention in both the United States and Canada dwelled on long-range plans for exporting liquefied natural gas (LNG), current traffic at established North American tanker ports all but evaporated. U.S. LNG imports plunged by 39.9% to 33.2 Bcf in 1Q2013. However, prices increased by 57% year/year to US$5.64/MMBtu. U.S. LNG exports fell to zero in the first quarter from 10.6 Bcf a year earlier.

Total U.S. gas exports on pipelines into Canada and Mexico climbed by 8.6% to 436.3 Bcf in 1Q2013 from the year-ago exports of 401.8 Bcf.

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