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U.S. Gas Consumption from Imports Down to 11.1% in 2010

Natural gas exporters, led downward by Canadians, lost nearly one-third of their market share in the United States over the past three years, according to new trade data from the U.S. Department of Energy.

Only 11.1% of gas consumed in the U.S. during 2010 was from imports -- down from 16.4% in 2007, the peak year recorded by the department's natural gas regulatory activities section in its Office of Oil and Gas Global Security and Supply. The agency grants import and export licenses that include quarterly and annual trade reporting requirements.

The 2010 import share of American markets was the smallest since 1993, when the figure was 10.6% for the year. The about-face is no surprise to the Canadian industry, which is in the midst of a prolonged gas drilling slump and switch in field activity targets to oil, attributed to a combination of economic contraction and shale supply development in the U.S.

The drop in American use of foreign gas reversed two decades of continuous growth following creation of a "continental market" by deregulation and energy free trade policies in the U.S. and Canada.

Imports had negligible shares of the U.S. market until they rose to 1% in 1959, then edged upwards to 5.9% in 1979 only to fall back for the following 10 years, and took off on their long climb starting in 1987.

"The U.S. has been a net importer of gas from Canada since the late 1950s," the security and supply office observes. "The gas trade with Canada dwarfs all other gas exchange combined."

A burst of liquefied natural gas (LNG) deliveries to 771 Bcf drove the exporter market share in the U.S. to its 2007 peak.

But even in that record year for tanker cargoes from overseas, pipeline deliveries of 3.9 Tcf still accounted for 84% of total American imports of 4.7 Tcf. Except for marginal volumes from Mexico, Canadian sources dominated the continental trade through pipelines.

In 2010 LNG landings were 431 Bcf, or 11% of U.S. imports. Canadian pipeline exports held steady at 3.36 Tcf, changing by less than 1% from 3.34 Tcf in 2009.

The U.S. data, compiled by calendar year, varies only in detail from traditional contract-year information collected for Nov. 1-Oct. 31 periods by Canada's National Energy Board. But one global energy trade detail recorded by the Washington agency stands out: the emergence of a small but rapidly growing international "re-export" traffic in LNG.

The supply and security office reports that its records for the last three months of 2010 show "a huge -- 162.3% -- increase in LNG exports, driven by the relatively recent phenomenon of LNG re-exports."

American "LNG re-exports of previously imported gas greatly increased this quarter (October-December 2010), up 800.5% compared to last quarter (July-September 2010) and up 829.1% compared to the fourth quarter of 2009. Prices of these re-exports also increased, up 8.4% from last quarter and up 20.5% from the fourth quarter of 2009."

Volumes remain small. LNG re-exports from the U.S. were 34.5 Bcf for all of 2010, which was only large compared to the negligible 2.7 Bcf of 2009.

But the driver of the U.S. re-export tanker traffic is the same overseas magnet -- premium prices -- that has lit a fire under proposals for two Canadian LNG export terminals on the northern Pacific coast of British Columbia at Kitimat (see Daily GPI, March 21). If built on schedule, the terminal will ship out 1.65 Bcf/d within three to five years.

American pipeline exports to Canada fetched an average US$4.68/MMBtu in 2010. The re-exports -- which went to South Korea, the United Kingdom, Japan, Spain, Brazil and India -- did 46% better by averaging US$6.82.

Japan, a priority target of the Canadian LNG export projects, stood out as the champion among the overseas premium markets by paying a 2010 average of US$11.61/MMBtu, well above second-place India at US$7.15 and third-place South Korea at US$7.13.

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