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EIA: LNG Growing at Faster Pace than Canadian Supplies as U.S. Import Source

While imports of liquefied natural gas (LNG) into the U.S. in 2004 were nearly three times the volume received five years ago, pipeline imports of Canadian gas continued to be the greatest supply source to meet domestic demand, according to a new report released by the Energy Information Administration (EIA) Wednesday. However, the EIA indicated that LNG, which is growing at a faster clip, could overtake Canadian supplies as the main source of imports in the years ahead.

LNG imports rose 29% from the year-earlier period to 652 Bcf in 2004, accounting for about 17% of overall U.S. net imports (up from 13% in 2003), the statistical arm of the Department of Energy said in its report, "U.S. Natural Gas Imports and Exports: 2004." LNG imports are expected to remain at the same level in 2005, but increase to 1,000 Bcf in 2006.

At the same time, natural gas gross imports from Canada increased 169 Bcf, or 4.9%, over 2003 volumes to 3,607 Bcf, the EIA said. However, higher U.S. exports to Canada nearly offset the entire increase, it noted. After accounting for exports, net U.S. imports from Canada moved up only 46 Bcf, or 1.4%, to 3,212 Bcf. Net imports from Canada in 2004 were the smallest level in any of the past five years with the exception of 2003.

"The volume of imports from Canada in recent years has reflected the overall growth trend in Canadian production, which has slowed or declined since 2000 so that 2004 production of 6,351 Bcf was only 109 Bcf more than four years earlier," the agency said.

The United States holds the distinction of being the largest importer of natural gas in the world. And while LNG imports still represent only a small part of domestic demand, the U.S. also has become the third leading importer of LNG in the world behind South Korea and Japan. Altogether the U.S. received imports from eight countries in 2004, while it exported natural gas to three countries. Net U.S. imports amounted to approximately 15% of all domestic demand, a portion that has remained relatively constant since 1999.

In 2004, net imports to the U.S. were 3,404 Bcf, an increase of 140 Bcf, or 4.3%, over the previous year, according to the EIA. The rise in net imports for the year was the first increase since 2001, the agency said, but it added that net imports of natural gas and LNG were still well below the 2001 volume of 3,604 Bcf.

U.S. pipeline exports to Mexico in 2004 rose to 397 Bcf, reaching a new record, the EIA said. The increase from 2003 was 54 Bcf, or 16%. "Although the volume of exports is small relative to the size of the U.S. marketplace, the exports have almost quadrupled since 2000 to serve industries by the border and supplement production from Petroleos Mexicanos (Pemex), Mexico's state-owned petroleum company."

The average price for all imports rose 64 cents/Mcf in 2004, up 12%, from the average price of $5.17/Mcf in the year-earlier period, and 84% higher than the average price of $3.15/Mcf in 2002, the EIA said. On a volumetric basis, the prices of imports by pipeline and for LNG were nearly identical at $5.80/Mcf. However, because of the higher Btu content of LNG compared to Canadian exports, prices for LNG ($5.47/Mcf average) on a Btu basis were less than those for pipeline imports ($5.70/Mcf average) in 2004.

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