Canadian exporters suffered a US$1.7 billion revenue hit as marginal volume growth failed to make up for soft prices during the first three quarters of the current natural gas trading year, records of the National Energy Board (NEB) show.
Measured in their own currency, the Canadians' loss was a more drastic C$2.4 billion. Sharp, rapid increases in the value of the Canadian dollar against its U.S. counterpart amplified gas market trends by effectively lowering prices on sales to Americans. In U.S. dollars, Canadian gas export revenues from last Nov. 1 through July 31, 2007 were $19.5 billion, down 8% from $21.2 billion for the first nine months of the 2005-06 contract year.
American dollar prices fetched at the international border by Canadian pipeline deliveries dropped 10% to an average $7.10/MMBtu for the first three quarters of the current trading year from $7.92/MMBtu in the same period of 2005-06.
Export volumes rose by 2.8% to 2.73 Tcf in the nine-month period from 2.66 Tcf in the first three quarters of the 2005-2006 international gas contract year. In Canadian dollars nine-month gas export revenues were $22 billion, down nearly 10% from $24.4 billion in the first three quarters of 2005-06. Canadian dollar prices dropped 12% to an average $7.47 per gigajoule in the first nine months of the current gas trade year from $8.48 for the same period of 2005-06.
The Canadian currency's rapid rise to near par with the U.S. dollar -- and even occasionally trading above the greenback -- has deeply eroded export revenues for all commodities. Until the exchange rate switch emerged about 18 months ago, a US$1 sale to Americans translated into as much as C$1.30-$1.40 for Canadian exporters.
The gas export revenue erosion goes a long way towards explaining the industry's hot and virtually unanimous protests against royalty increases proposed in Alberta, source of four-fifths of Canadian production. The resistance emphasizes that the industry is in no condition to withstand even minor increases and will cut drilling budgets to the extent that any are enacted.
Alberta Premier Ed Stelmach is scheduled to make a start Wednesday on revealing his government's responses to a royalty reform report issued in mid-September by a cabinet-appointed inquiry group. He will begin with a review of guiding policy principles in a prime-time, live telecast of an annual fall state-of-the province address from the capital of Edmonton. At least some details are expected to be disclosed at a follow-up news briefing on Thursday in the industry's Calgary home base, and during a weekend policy convention there of Stelmach's provincial Conservative party.
Industry analysts and corporate leaders remain wary of gas markets despite recent firming, thanks to the experience so far this trading year. Prices were down in all export destinations during the first nine months of the current gas trade year. Pipeline deliveries of Canadian gas to California fetched an average US$6.73/MMBtu, down 11% from US$7.54 in the first three-quarters of 2005-06. Volumes rose 0.5% to 338 Bcf.
Canadian exports to the U.S. Midwest averaged US$7.02 in the first nine months of the current trading year, down 11% from US$7.89 during the Nov. 1, 2005 through July 31, 2006 period. Midwest sales volumes also dropped, slipping by 3% to 1.09 Tcf.
Prices for Canadian gas in the U.S. Northeast dropped 9% to an average US$7.48 MMBtu in the first three quarters of this trading year from US$8.20 for the same period of 2005-06. Sales volumes were up by 7.3% to 970 Bcf.
Canadian exports to the U.S. Pacific Northwest averaged US$6.66 for the first nine months of the current contract year, down 12% from US$7.91 in the same period of 2005-06. Sales volumes jumped 19% to 330 Bcf.
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