Canadian natural gas export volumes have stabilized at reduced levels left by the 2008-2009 economic contraction, and prices and revenues show signs of regaining lost ground, according to trade figures from Canada’s National Energy Board (NEB).
The agency’s latest annual scorecard, while stopping well short of reporting a recovery, paints a bright picture by contrast with the deep gloom that shrouded the North American gas traffic 12 months ago.
Canadian pipeline deliveries to the United States finished the contract year that ended last Oct. 31 at 3.27 Tcf, down 1.2% from 3.3 Tcf for the previous comparable period. The marginal change was a sharp improvement on November 2008 through October 2009, when sales volumes shrank by 10.7% from 3.7 Tcf in 2007-2008.
At US$4.59/MMBtu, the annual average price fetched by Canadian gas at the international border in 2009-2010 was a 3.8% increase from US$4.42/MMBtu in the previous contract year. Last January the NEB scorecard on 2008-2009 registered a 49% export price drop from US$8.69 in 2007-2008.
The price improvement was strong enough to more than compensate for the slight drop in sales volumes last year. Canadian gas export revenues increased by 2.7% to US$15.14 billion in the 2009-2010 contract year from US$14.74 billion in 2008-2009. Last January the NEB tally recorded a 54.5% plunge from US$32.4 billion in 2007-2008.
An unfavorable exchange rate trend, rather than further worsening of commodity market fundamentals of supply and demand, was the culprit behind the bleakest entries on the NEB’s latest gas trade scorecard. The Canadian loonie’s rise — or its U.S. counterpart’s fall — to parity between the two currencies turned the price and revenue results negative when measured in the funds of gas exporters’ home country.
Expressed in Canadian loonies, the annual average gas export price fell by 9.2% to C$4.44/gigajoule (GJ) in 2009-2010 from C$4.89/GJ in 2008-2009. Total revenue from pipeline deliveries to the United States dropped by 10.2% to C$15.72 billion for 2009-1200 from C$17.52 billion for 2008-2010.
From the Canadian point of view on the past two years, the combined effects of the energy market contraction and currency upheaval add up to severe deterioration. Since the last fat gas contract year of 2007-2008, the annual average price in loonies fetched by pipeline deliveries to the United States has dropped by 46% to C$4.44/GJ from C$8.27. Annual export revenue has plunged by 53% to C$15.7 billion from C$33.1 billion.
Canadian exports took falls on all fronts in the international natural gas trade’s last contract year, show records of the NEB. Deliveries to the United States slipped by 10.7% in the 12 months that ended last Oct. 31. Prices dropped 49%. Revenues plunged by 54.5%.
The setbacks have put an end to a 20-year growth streak that multiplied Canadian sales volumes into the United States nearly four-fold from a depressed base of 993 Bcf at the 1987 onset of international gas deregulation and free trade. In combination with the era’s upward price trend, the rising delivery pace generated nearly a nine-fold increase in annual export revenues from about C$4 billion in the mid-1980s.
It has become conventional wisdom among Canadian economists that the fat gas years will not be repeated any time soon. The conviction shows, for instance, in a 2011 new year forecast by Calgary Economic Development, a civic agency in the Canadian gas capital that forecasts local conditions such as construction and employment by canvassing industry and financial analysts. By the booming growth standards set in most of the 21st Century’s first decade, the year ahead looks like a lull or at best just slightly better than flat — and the cause is “depressed gas prices” that will offset rising activity on the oil side of the Canadian energy industry, says the municipal research house.
So far in the 2011, gas markets have confirmed that their old excitement is gone. Not even a severe Western Canadian cold snap has driven prices back up much. Despite temperatures in the minus 20-degree area, Canadian gas remains stuck in a lean trading range of C$3.70-$4.00/MMBtu on Alberta’s Nova storage and transportation hub.
Instead of the tall heating season price spikes of bygone years, the Alberta-based Western Canadian gas industry is only seeing modest daily variations of a nickel or less per MMBtu this winter. High volumes in storage and increased production capacity, due to shale gas development, are effectively capping prices, says FirstEnergy Capital Corp.
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