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
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