Rising sales volumes and favorable currency exchange rates morethan made up for erosion of prices fetched by Canadian exports inthe last natural gas contract year.

Canadian deliveries to the United States hit a record 3.11 Tcffor the 12 months that ended last Oct. 31, according to recordskept by the National Energy Board. Last year’s performance was a7.1% improvement on 1996-97, even without the pipeline projects nowunder way to generate major increases in export capacity. Averagegas export prices in 1997-98 slipped by 9.6% to US$1.97 per MMBtufrom $2.18 during the previous contract year. But declines in thevalue of the Canadian dollar compared to U.S. money cut in half thedamage to prices. Gas exports averaged C$2.68 per gigajoule in1997-98, down only 3.6% from $2.78 the previous contract year. As aresult, the total value of the increased sales volumes to the U.S. in the last gas contract year reached C$8.986 billion, which was a3.2% gain from $8.71 billion in the preceding 12 months. IfCanadian exporters had not been shielded by the exchange rates,they would have lost 3.3% with 1997-98 total revenues of US$6.15billion compared to $6.35 billion the previous contract year. Canadian export sales under long contracts fell, continuing a trendthat has lasted through the 1990s. Deliveries under short-termsales agreements rose 17.8% in the last contract year to 2.18 Tcfor 70% of total exports. The share of the U.S. market for Canadiangas that still uses long-term contracts fell 11.9% to 924.5 Bcf in1997-98.

The fastest-growing outlet for exports was the U.S. RockyMountain region, where purchases of Canadian gas in 1997-98 jumpedby 45% to 38.3 Bcf compared to 26.4 Bcf the preceding contractyear.

The U.S. Pacific Northwest was the second fastest-growingimporter of Canadian gas, with purchases rising by 14% in 1997-98to 562.8 Bcf from 493.6 Bcf the previous year. That performance hasfirmed up demand and prices of production from British Columbiacompared to the mid-1990s (although not 1996-97) and madenortheastern B.C. into Canada’s hot spot for drilling. A record 496gas wells were drilled in northeastern B.C. last year and industrysources say every rig in the region is busy this winter. That trendis forecast to continue indefinitely, thanks also to theforthcoming Alliance Pipeline from northeast B.C. into Chicago.

Export pipelines into the northeastern states ran full, withCanadian sales volumes rising by 7.1% to 700.7 Bcf in 1997-98. Thesame thing occurred in the Middle West, where imports of Canadiangas rose 8.1% to 1.09 Tcf. Canadian sales to California declinedmarginally by 0.7% to 714.8 Bcf in 1997-98. Expressed in U.S.currency, Canadian border prices fell across the board in the lastcontract year with the lone exception of the Rocky Mountain region,where there was a marginal 1.7% increase to $1.65 per MMBtu. Thedecline was 12.9% to $2,55 in the Northeast, 12.3% to $2.01 in theMiddle West, 6.5% to $1.69 in the Pacific Northwest, and 3.2% to$1.58 in California. Among American importers, local distributioncompanies were the hardest bargainers, achieving a 10.3% reductionin average prices paid for Canadian gas to US$2.42 per MMBtu duringthe 1997-98 contract year from $2.65 the previous 12 months. U.S.marketing organizations cut their import costs by 9.5 per cent to$1.88 while pipelines bargained down their import prices by 9.7% to$1.97. American gas end-users paid $2.42 for Canadian imports in1997-98, down 8.7% from $2.65 the preceding contract year.

Gordon Jaremko, Calgary

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