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Canadian Exports Up 12.9% Since November

Canadian Exports Up 12.9% Since November

The optimists are turning out to be right as Canadian natural gas exports to the United States continue to climb, laying to rest pessimistic productivity forecasts a year ago.

Exports jumped 12.9% in the first one-third of the current contract year since last Nov. 1, according to records kept by the National Energy Board. While the biggest gain came on the newly-opened Maritimes & Northeast Pipeline from the Sable Offshore Energy Project, deliveries out of western Canada rose sharply too.

Total Canadian sales into the U.S. reached 1.19 Tcf during the period Nov. 1, 1999, to Feb. 29, up from 1.05 Tcf in the same period of the 1998-99 contract year. The volume growth came at a time of smartly rising prices. Canadian gas export revenues shot up by 39.6% in the first one-third of this contract year to US$2.97 billion from US$2.13 billion in the first four months of 1998-99. The average price fetched at the international border rose 23.9% to US$2.49 per MMBtu from US$2.01.

The biggest single sales gain chalked up by Canadian exporters was in the northeastern states, where deliveries climbed 24.5% in the first one-third of the current contract year to 316.7 Bcf from 254.4 Bcf in the same period of 1998-99. Making its first appearances on the NEB charts, M&NP had first-third deliveries of about 4.3 Bcf as the line gradually powered up following regulatory delays during the winter. In February, the new line to New England from SOEP offshore of Nova Scotia carried about 130 MMcf/d. Border prices averaged US$3.32 per MMBtu.

Volumes of western Canadian gas delivered to the northeastern states via the traditional routes --- along TransCanada PipeLines then across the border at Iroquois and Niagara Falls --- rose to a combined 266 Bcf in Nov. 1-Feb. 29. That was up 20% from 221 Bcf in the first third of the 1998-99 contract year. Average prices ranged from US$3.75 per MMBtu at Iroquois to US$3.99 at Niagara Falls so far this contract year, compared to US$3.04-$3.40 in the first one-third of 1998-99.

In the first third of the 1999-00 sales year, Canadian exports to California increased 6.6% to 246.6 Bcf and the average price rose 28.7% to US$2.36 per MMBtu. Deliveries to the middle-western U.S. climbed 17.6% to 454 Bcf and prices rose 28.5% to US$2.36. The Pacific Northwest was the poorest performing market, but a 10% price increase to US$2.40 per MMBtu more than made up for a 6% dip in volumes to 161 Bcf.

Canadian industry analysts projected continued strength in both volumes and prices. They pointed to May heat waves across the western U.S. that spelled an early start to the air-conditioning season. Spot prices in Alberta on gas destined for all Canadian and American markets rose about 10% into the C$4.40 range per gigajoule (US$3.20 per MMBtu). At the same time, Alliance Pipeline Project's publicly-traded shareholder, Fort Chicago Energy Partners, predicted the new, 1.3-Bcf-daily export route will be completed on schedule in October. Alliance's operating team projects its volumes will rapidly rise into the 1.5 Bcf range, taking advantage of built-in operating efficiencies.

With prices for oil as well as gas holding up, the Canadian industry showed no signs of straining the capacity of its reserves. Instead, producers eager to take advantage of the healthy markets achieved a marked acceleration in exploration and development.

First-quarter activity prompted forecasts that the 1997 western Canadian record of 16,500 wells will be reached or exceeded this year, by the Canadian Association of Oilwell Drilling Contractors. The Petroleum Services Association of Canada held its projections a touch below the record, warning that labor shortages could develop. Despite strong oil prices, 60-70% of the drilling was still expected to be aimed at gas.

In low-cost, shallow prospecting for relatively small reserves on the western plains, a new generation of equipment including coiled-tubing rigs that work like dentist drills and complete wells in less than half a day is running at capacity. But increasing amounts of the activity are directed at relatively costly but also more prolific targets along the foothills and eastern slopes of the Rocky Mountains in Alberta and northeastern British Columbia.

Gordon Jaremko, Calgary

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