The optimists are turning out to be right as Canadian naturalgas exports to the United States continue to climb, laying to restpessimistic productivity forecasts a year ago.

Exports jumped 12.9% in the first one-third of the currentcontract year since last Nov. 1, according to records kept by theNational Energy Board.While the biggest gain came on thenewly-opened Maritimes & Northeast Pipeline from the SableOffshore Energy Project, deliveries out of western Canada rosesharply too.

Total Canadian sales into the U.S. reached 1.19 Tcf during theperiod Nov. 1, 1999, to Feb. 29, up from 1.05 Tcf in the sameperiod of the 1998-99 contract year. The volume growth came at atime of smartly rising prices. Canadian gas export revenues shot upby 39.6% in the first one-third of this contract year to US$2.97billion from US$2.13 billion in the first four months of 1998-99.The average price fetched at the international border rose 23.9% toUS$2.49 per MMBtu from US$2.01.

The biggest single sales gain chalked up by Canadian exporterswas in the northeastern states, where deliveries climbed 24.5% inthe first one-third of the current contract year to 316.7 Bcf from254.4 Bcf in the same period of 1998-99. Making its firstappearances on the NEB charts, M&NP had first-third deliveriesof about 4.3 Bcf as the line gradually powered up followingregulatory delays during the winter. In February, the new line toNew England from SOEP offshore of Nova Scotia carried about 130MMcf/d. Border prices averaged US$3.32 per MMBtu.

Volumes of western Canadian gas delivered to the northeasternstates via the traditional routes — along TransCanada PipeLinesthen across the border at Iroquois and Niagara Falls — rose to acombined 266 Bcf in Nov. 1-Feb. 29. That was up 20% from 221 Bcfin the first third of the 1998-99 contract year. Average pricesranged from US$3.75 per MMBtu at Iroquois to US$3.99 at NiagaraFalls so far this contract year, compared to US$3.04-$3.40 in thefirst one-third of 1998-99.

In the first third of the 1999-00 sales year, Canadian exportsto California increased 6.6% to 246.6 Bcf and the average pricerose 28.7% to US$2.36 per MMBtu. Deliveries to the middle-westernU.S. climbed 17.6% to 454 Bcf and prices rose 28.5% to US$2.36. ThePacific Northwest was the poorest performing market, but a 10%price increase to US$2.40 per MMBtu more than made up for a 6% dipin volumes to 161 Bcf.

Canadian industry analysts projected continued strength in bothvolumes and prices. They pointed to May heat waves across thewestern U.S. that spelled an early start to the air-conditioningseason. Spot prices in Alberta on gas destined for all Canadian andAmerican markets rose about 10% into the C$4.40 range per gigajoule(US$3.20 per MMBtu). At the same time, Alliance Pipeline Project’spublicly-traded shareholder, Fort Chicago Energy Partners,predicted the new, 1.3-Bcf-daily export route will be completed onschedule in October. Alliance’s operating team projects its volumeswill rapidly rise into the 1.5 Bcf range, taking advantage ofbuilt-in operating efficiencies.

With prices for oil as well as gas holding up, the Canadianindustry showed no signs of straining the capacity of its reserves.Instead, producers eager to take advantage of the healthy marketsachieved a marked acceleration in exploration and development.

First-quarter activity prompted forecasts that the 1997 westernCanadian record of 16,500 wells will be reached or exceeded thisyear, by the Canadian Association of Oilwell Drilling Contractors.The Petroleum Services Association of Canada held its projections atouch below the record, warning that labor shortages could develop.Despite strong oil prices, 60-70% of the drilling was stillexpected to be aimed at gas.

In low-cost, shallow prospecting for relatively small reserveson the western plains, a new generation of equipment includingcoiled-tubing rigs that work like dentist drills and complete wellsin less than half a day is running at capacity. But increasingamounts of the activity are directed at relatively costly but alsomore prolific targets along the foothills and eastern slopes of theRocky Mountains in Alberta and northeastern British Columbia.

Gordon Jaremko, Calgary

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.