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Imports From Canada on the Rise, Data Show

Natural gas traffic between Canada and the United States accelerated at a brisk pace last heating season, according to fresh trade data from Washington that confirm records kept by Ottawa's National Energy Board (NEB).

U.S. pipeline imports rose 4.8% to 1.029 Tcf in the first quarter of 2008 from 982 Bcf in January through March of 2007, reports the gas regulatory activities branch of the U.S. Department of Energy's Office of Oil and Gas Global Security and Supply. The quarterly weighted average price of deliveries from Canada jumped 16.6% to US$8.13/MMBtu last winter from $6.97 in the same period of 2007.

The American calendar-year data differs only in detail from NEB monitoring that tracks the gas contract year ending Oct. 31. Through March 31, 2008 of the 2007-2008 calendar year, Canadian trade records show pipeline exports grew 10.6% to 2.03 Tcf from 1.84 Tcf in the same six months ending March 31 of 2007, and prices climbed 14.7% to average US$8.20/MMBtu from $7.15.

U.S. imports of liquefied natural gas (LNG) dropped 58.9% in the first quarter of calendar 2008 to 75.7 Bcf from 184.4 Bcf in January through March of 2007, the U.S. trade records show.

Prices fetched by LNG tanker cargoes rose 25.9% to average US$8.57/MMBtu in the first quarter of calendar 2008 from $6.81/MMBtu a year earlier. But the increase was not enough to lure vessels away from even stronger European and Asian markets.

"Only 30 cargoes of LNG were imported," the U.S. trade record says. "Most of this reduction from a year ago is due to the high demand for LNG in Europe and Asia, especially in the winter months."

Traffic out of the U.S., while much smaller than inbound flows, also accelerated. Total exports including a single tanker load of LNG rose 19.2% to 324.1 Bcf in the first three months of calendar 2008 from 202.8 Bcf in the same period of 2007. Overall average American gas export prices gained 19.2% to US$8.33/MMBtu in first-quarter calendar 2008 compared to $6.99/MMBtu a year earlier.

American pipeline exports to Canada jumped 55% to 199 Bcf in first-quarter calendar 2008 from 128.4 Bcf a year earlier. Prices fetched by northbound deliveries climbed 18.8% to US$8.42/MMBtu last winter from $7.09/MMBtu a year earlier.

U.S. exports to Mexico climbed 93.3% to 115.6 Bcf in first-quarter 2008 from 59.8 Bcf in the opening three months of 2007. Prices fetched by shipments to Mexico rose 17.7% to US$8.30/MMBtu in the first three months of this year from $7.05/MMBtu in the same period of 2007.

As in the U.S., the quickening pipeline gas trade pace at strengthening prices combined with reduced LNG deliveries to North America has contributed to increased drilling in Canada.

As of this week 440 Canadian drilling rigs were at work, up from 407 a year ago. The quality of industry targets also continues to change, with 281 Canadian rigs capable of drilling deeper than 2,450 meters (8,000 feet) active while only 93 units built for shallow targets less than 1,850 meters (6,000 feet) are busy. Canadian industry associations and analysts continue to project a sustained price recovery and gradually accelerating drilling through the next heating season.

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