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FBR Revises Forecast, Now Sees 4% Decline in Canadian Gas Exports

Another energy analyst is forecasting a decline in Canadian natural gas exports to the United States, mirroring predictions by Canadian experts and the National Energy Board (NEB). According to Friedman, Billings, Ramsey & Co. Inc., Canadian gas exports are expected to decline this year by 4% (0.4 Bcf/d), following a similar decline in 2006.

FBR cut an earlier forecast, which indicated Canadian gas exports would decrease by about 0.08 Bcf/d this year. FBR energy analyst Amir Arif said the lower forecast is a result of reduced drilling and increasing oilsands consumption as existing projects ramp up and new projects come on line.

Arif's forecast follows recent reports by the NEB, which reported Canadian gas exports to the United States have declined and appear to be on a downward trend (see Daily GPI, Jan. 29; Jan. 5). Canadian energy analysts at Peters & Co. and FirstEnergy Capital Corp. also noted in December that gas exports to the United States could fall this year by as much as 1 Bcf/d, or about 10%, because of less production and more consumption (see Daily GPI, Dec. 22, 2006).

"Drilling and completion activity is expected to drop 10-15% in 2007 as a result of higher drilling costs, lower crew productivity, lower and more volatile commodity prices and widening AECO-Henry Hub differentials," Arif noted. Last year, FBR estimated 2006 Canadian gas exports declined 0.4 Bcf/d, with 0.1 Bcf/d lost to increased oilsands consumption. FBR said 2006 well completions totaled 15,362, flat compared with 15,355 completions in 2005.

"However, gas completion activity dropped significantly in 4Q2006, falling approximately 8% from the previous year's level," Arif wrote. "The decreased gas well completion activity was mostly due to fewer shallow gas wells being drilled. The 4Q2006 reduced completion activity will be felt in the next few months."

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