Canadian exporters have all but arrested the decline in their pipeline deliveries to the United States, according to the latest figures on the international natural gas trade collected by the National Energy Board (NEB).
The slippage slowed to a marginal 1.5% dip in volumes during the first nine months of the 2009-2010 contract year ending Oct. 31. During the comparable period of Nov. 1 through July 31 of 2008-2009 Canadian sales into the United States plunged by 12.5%.
This summer exporters turned the trade trend around completely as U.S. supply growth tapered, while a sustained heat wave raised demand for gas to fuel power plants that were fired up in response to power demand for air conditioning. Canadian gas exports in July hit 276.7 Bcf, up 3.7% from 266.9 Bcf in July 2009.
In the first nine months of the current contract year, export volumes were 2.46 Tcf, compared with 2.498 Tcf during the November-July period of 2008-2009.
Prices firmed at the international boundary, where the 2009-2010 nine-month average fetched by Canadian gas was US$4.83/MMBtu, up 1.1% from US$4.78/MMBtu during the comparable period a year earlier.
On the pricing front, even the current return to stability is a dramatic improvement on previous setbacks. During the first nine months of the last trading year of 2008-2009, NEB records show that the average price for Canadian gas exports plummeted by 47.2% to US$4.78/MMBtu from US$9.05 in November-July of 2007-2008.
The combination of relatively stable sales volumes and prices has likewise shored up Canadian gas export revenues. Pipeline deliveries to the United States in the first nine months of the current contract year fetched US$11.98 billion, which was within 1% of the $12.03 billion received during the same period of 2008-2009.
Exchange rates were responsible for the last element of adversity left in the gas trade, from the Canadian point of view. The steady rise in the loonie, toward near par with the U.S. dollar, continues to erode the value of international sales when it is measured in the exporters’ currency.
In Canadian funds, average prices fell by 13.2% to C$4.69/gigajoule (GJ) in the first three quarters of the current contract year from C$5.40/GJ for the same period of 2008-2009. Export revenues dropped by 14.6% to C$12.476 billion during November-July of 2009-2010 from C$14.6 billion during the same period of 2008-2009.
Even the remaining bleak side of the international gas trade was bright by the standard of severe decay set last year. During the first nine months of the 2008-2009 contract year, border prices plunged by 36.2% to C$5.40/GJ from C$8.47/GJ during the comparable period of 2007-2008. Export revenues plummeted by 44.1% in the first three-quarters of the 2008-2009 contract year to C$14.5 billion from C$26.1 billion in November-July of 2007-2008.
North of the border in the Canadian gas capital of Calgary, a debate on the market’s future continues. While bears dwell on full storage facilities and high shale gas expectations, the bullish faction holds out hope that the current firming is a start on a brighter future as U.S. supply growth tapers off, demand stabilizes and use of gas as a power plant fuel potentially rises due to reduced prices as well as environmental encouragement to replace coal.
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