Higher Prices Boost Canadian Export Revenues 29%
The last contract year is going down as one to remember in the Canadian
natural-gas community. Exporters chalked up a banner year before El Nino's
warm winds blew down prices.
For the gas contract year that ended last Oct. 31, revenues reached
C$8.7 billion (US$6.4 billion-a record that was a 28.8% improvement over
the preceding 12 months, when sales to the United States fetched C$6.7
billion, or US$5 billion).
Although volumes set an export record, strong prices accounted for most
of the revenue gain, according to a scorecard kept on the international
gas trade by the National Energy Board. Volumes of sales to the U.S. were
2.9 Tcf in 1996-97, or a 2.9% increase from deliveries of 2.8 Tcf during
the previous contract year. The overall average export price rose 24.8%
in 1996-97, to US$2.19/MMBtu compared to US$1.75 the previous contract
The most improved export destination was California, where prices climbed
63.3% to C$2.13/gj (US$1.56) last year from C$1.30 (US95 cents) in 1995-96.
The northeastern U.S. continued to stand out as the outlet paying by far
the highest prices: an average C$3.73 (US2.74) for the 12 months ended
last Oct. 31 compared to C$3.47 (US$2.55) the previous contract year. Prices
rose by 24% to C$2.97 (US$2.18) in the U.S. Middle West, 47% to C$2.79
(US$2.05) in the Pacific Northwest and 35% to C$2.08 (US$1.52) in the Rocky
California also continued to be the biggest gas export outlet by volume,
buying 759 Bcf in 1996-97 or 12.7% more than the previous contract year
total of 673 Bcf. Sales volumes dropped 2.5% in the northeastern U.S. to
639 Bcf in 1996-97. Annual volumes stayed the same at 992 Bcf in the Middle
West while rising by 1.2% to 484 Bcf in the Pacific Northwest and climbing
33.5% to 26 Bcf in the smallest export outlet, the Rocky Mountain region.
The last gas contract year also maintained a long-term trend forecast
to continue indefinitely by virtually all government and industry agencies
in Canada. Long sales contracts, the mainstay of the Canadian industry
prior to the onset of deregulation and free trade in the mid-1980s, continue
to shrink in favor of short arrangements with terms of two years or less.
Exports under long-term sales arrangements shrank by 9.7% to 1 Tcf or just
one-third of the trade during the 1996-97 contract year. Sales under short-term
agreements rose 11.4% to 1.88 Tcf or two-thirds of the international gas
Long-term sales contracts returned the highest prices in 1996-97, averaging
C$3.24 (US$2.38) per gigajoule or 20% better than the previous year's C$2.70
(US$1.98). But short contracts scored the biggest price gains, rising 33%
to average C$2.55 (US$1.87) in 1996-97 compared to C$1.92 (US$1.41) during
the preceding 12 months.
Canadians knew the 1996-97 revenue records will likely stand for some
time to come-and possibly into the next millennium-without being reminded
that American prices have dropped by about a third since the end of the
contract year, by the U.S. Energy Information Administration's annual winter
As El Nino swept across the continent late last fall, prices for some
domestic sales within Canada retreated as low as $C1 (US70 cents) or even
a few cents less during the warmest spells. In the industry capital of
Calgary, local distributor Canadian Western Natural Gas filed with the
Alberta Energy and Utilities Board for reduced commodity rates expected
to give typical residential customers rebates of C$25 (US$18.35) each for
the rest of the heating season Jan. 19 through March 31.
But it was noted that the EIA provided some additional food for thought
about the effects on the international markets by the developing wave of
Canadian export pipeline projects. The Washington agency identified rising
Canadian imports as a factor in a forecast drop in U.S. wellhead prices
by as much as 13% in 1998 and possibly more in 1999.
Gordon Jaremko, Calgary