Canadian natural-gas exporters set their 12th consecutive annualsales record in the United States during the contract year thatended Oct. 31. Exports climbed to 3.26 Tcf last year, shows ascorecard kept by the National Energy Board. The new recordimproved by 5% on the previous high of 3.1 trillion set in the1997-98 contract year.

Canadian revenues from gas exports also climbed. The take roseto C$10.36 billion in 1998-99, up 15% from C$8.99 billion for thepreceding sales year. In U.S. currency, the gain was 12.5% to $6.92billion for 1998-99 compared to $6.16 billion the previous contractyear.

Prices improved at the same time as sales grew. At the border,Canadian gas fetched an average C$2.95 per gigajoule in 1998-99 or10% more than the C$2.68 of the preceding contract year. The pricegain was nearly all real, and not just an effect of exchange rates.In the currency of the American customers, Canadian exportsaveraged US$2.12 per MMBtu in 1998-99, up 7.4% from US$1.97 in thepreceding year.

The new record means Canadian gas exports to the U.S. havemultiplied 4.6-fold since the trade hit bottom in 1983. At thattime, annual exports withered to about 707 Bcf under the bygoneNational Energy Program imposed by a federal Liberal governmentthat is still vividly remembered with great anger that continues toaffect voting patterns in western Canada. The NEP restricted salesvolumes in the name of protecting Canadian supplies while alsodriving away customers for the gas that was allowed to flow bysetting unrealistically high border prices that peaked at US$4.94.Canadian gas exports to the U.S. began recovering after the NEP wasdismantled by 1985 federal-provincial agreements. It took threemore years to top the old annual record of 1.03 Tcf set in 1973.But the Canadian industry hit a growth stride that has made annualvolume records look routine since the first breakthrough to 1.28trillion in 1988.

The Canadian share of the U.S. gas market has about tripled intothe range of 14-15%, from a low of 4-5% under the NEP.Despiteperiodic setbacks in prices on volatile markets, annual gas-exportrevenues have nearly quadrupled since hitting bottom at US$1.8billion in the mid-1980s.

The new 1999-2000 contract year that began Nov. 1 already lookslike another record breaker. Deliveries started this month fromNova Scotia’s Sable Offshore Energy Project via newly-completedMaritimes & Northeast Pipeline, a route to New England withcapacity to add at least 146 Bcf or 4.5% to annual Canadian gasexports. The stage is set for further growth in the 2000-01 salesyear too because Alliance Pipeline is on schedule to complete itsroute from western Canada to Chicago in October, potentially addinganother 484 Bcf or 15% to annual exports.

While there continues to be controversy about the productioncommunity’s ability to fill the new export capacity, TransCanadaPipeLines Ltd.devoted its first customer newsletter of 2000 todescribing growth opportunities. Although struggling with newproblems of competition and excess capacity, TransCanada echoes theconsensus north of the international border that the Canadianindustry as a whole is still on an expansion course. “All in all,Canadian producers and marketers are faced with a positiveenvironment, given an Alberta price connected to other NorthAmerican markets, the increasing demand for Canadian gas both athome and in the U.S., and the expectation of no export capacityconstraints.”

Another long-term marketing trend besides growth, dating to theonset of deregulation, continued in the last contract year. Volumesof Canadian exports sold under long-term agreements, once virtuallythe only technique, slipped in 1998-99 by 1.3% to 925.5 Bcf or just28% of total deliveries to the U.S. Short-term sales rose by 7.8%to 2.34 Tcf.

The NEB’s scorecard also confirmed indications, in records onthe gas trade kept by the U.S. Department of Energy, that a swingis under way in export destinations. The Canadians are turning tothe eastern side of the continent for growth.

Deliveries to California – the favorite Canadian marketingtarget for decades – slipped to 657 Bcf in 1998-99, down 10.7% from736 Bcf the year before. Shipments to the Pacific Northwest lastcontract year also faltered, dropping by 7.1% to 501 Bcf comparedto 539 Bcf in 1997-98.

Exports to the U.S. Middle West rose by 17.6% in 1998-99 to 1.28Tcf from 1.08 Tcf the previous contract year. Canadian deliveriesto the U.S. Northeast rose 11.5% in 1998-99 to 789 Bcf compared to707 Bcf in the preceding contract year.

Averages prices for exports to California climbed by 22% in1998-99 to US$1.93 per MMBtu from $1.58 in the preceding contractyear. But prices for deliveries to the Middle West 1998-99remained higher, at an average $2, even though they slipped by apenny from $2.01 in 1997-98. In the Pacific Northwest, Canadian gasfetched an average $2.11 in 1998-99, up 24% from $1.70 the previouscontract year. But the U.S. Northeast remained more attractive toexporters at an average $2.46 in 1998-99, even though that was down3.7% from $2.56 in 1997-98.

Gordon Jaremko, Calgary

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