The 55% share of the Canada’s gas output that is exported to the United States has dropped for the eighth month in a row. The latest report on exports by the National Energy Board showed a 9.8% decline in volumes during August, to 293.9 Bcf compared to 325.8 Bcf during the same month in 2002. Exports dropped despite sharply higher prices and ample capacity on the pipeline grid for delivering as much gas as Canada can produce.

Chronic excess capacity has plagued TransCanada PipeLines and its Nova grid in Alberta since the Alliance Pipeline went into service three years ago, leaving 1-2 Bcf/d of vacant space on the old system. There is no sign that the decline in U.S. exports results from supplies being diverted to domestic markets — there is only evidence that consumers on both sides of the border are competing for limited supplies.

Natural Resources Canada calculates that the nation’s total production of 481 Bcf in August was down by 3% compared to the same month of 2002. Domestic demand of 140 Bcf for the month was up 3% from August in 2002. The average price fetched by Canadian gas at the international border in August was US$4.62/MMBtu, up 77.7% compared to US$2.60 during the same month a year earlier.

Increased revenues continued to mask the trend towards shrinking gas supplies, with the improved prices more than compensating for lost sales volumes. Canadian gas export revenues were US$1.36 billion in August, 60.7% higher than the US$852 million received a year earlier. For the first 10 months of the gas-contract year that ended Oct. 31, Canadian gas exports were down by 2.7% to 2.99 Tcf compared to 3.07 Tcf in the same period of 2001-02.

Average prices were up 83.9% at US$5.06/MMBtu and total revenues gained 78.5% to $15.23 billion. Delivery volumes rallied during the first two months of the current contract then turned down in January and have not rebounded since. The decline has affected two of the four principal destinations for gas exports.

In the first 10 months of the 2002-03 gas contract, Canadian shipments to the middle-western U.S. rose 2% to 1.32 Tcf and prices there climbed 88.6% to US$5.09/MMBtu. Deliveries to the northeastern states increased by 4.4% to 946.4 Bcf and prices gained 73.9% to US$5.39. But volumes exported to California dropped 12.8% to 388.5 Bcf despite an 89.7% improvement in average prices paid by the golden state to US$4.62 per MMBtu. Shipments to the U.S. Pacific Northwest were off by 19.7% at 328.8 Bcf while prices fetched by Canadian gas there gained 78.7% to US$4.49.

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