The end is in sight for the long winning streak chalked up by Canadian natural-gas exporters, as deliveries remain consistently off their formerly torrid pace in setting 14 consecutive annual sales records in the United States. Canadian gas deliveries to the U.S. fell by 5.3% to 2.745 Tcf in the first three-quarters of the current gas contract year that ends Oct. 31 from 2.9 Tcf in the same period of 2000-01, the National Energy Board reports.

Gas export revenues plummeted by 53% for the period Nov. 1, 2001, to July 31, 2002, to US$7.68 billion from US$16.358 billion during the first nine months of the 2000-01 contract year. Average prices fetched by Canadian production at the international boundary dropped by 50.6% to US$2.77/MMBtu from US$5.60. Rather than a deep setback from long-range trends in the trade, the revenue losses register the deflation of the 2000-01 spike in gas and electricity prices that no one in Canada at the time believed would last.

Gas exporters’ revenues for the first three-quarters of the 2001-02 contract term still exceeded the total they received in all of 1999, US$7.4 billion. The price spike multiplied the value of Canadian gas exports to US$13.8 billion in 2000 and a peak of US$16.4 billion last year.

The slippage in sales volumes was worst in the middle-western U.S., where the NEB’s records show export sales dropped by 23.6% in the first nine months of the 2001-02 contract to 872.4 Bcf from 1.14 Tcf in the same period of 2000-01. Shipments to California dropped by 14% to 369 Bcf. Deliveries to the northeastern U.S. fell 10.8% to 789.6 Bcf.

Not all Canadian export markets weakened. Gas deliveries to the Pacific Northwest region of the U.S. shot up by 62.3% to 703 Bcf during the first-three-quarters of the 2001-02 contract year from 433.3 Bcf in the same period of 2000-01.

The blame for the slippage continues to be placed chiefly on the weather, U.S. economic setbacks and improving American gas supplies. The NEB record suggests that little practical difference in physical movements and sales of gas was made by the collapse of Enron Corp. early last December.

Energy marketing companies have remained by far the biggest buyers of Canadian gas exports. Their purchases have slipped by only about the same amount as the overall trade. The U.S. merchants took 1.9 Tcf of Canadian gas in the first nine months of the 2001-02 contract, or 5.8%less than their 2.017 Tcf in the same period a year earlier. Purchases by U.S. pipelines dropped 48.4% to 57.3 Bcf, accelerating a long-range trend of ending their former dominant role in gas buying and selling that started with the mid-1980s onset of deregulation.

Canadian industry analysts are projecting better luck at least for the opening months of the next gas contract year. The Calgary oil and gas stock boutique of Peters & Co. calculates that demand will increase faster than supply at an annual rate of 400 MMcf/d. But the firm also acknowledges projections by the U.S. Energy Information Administration that the imbalance could go the other way unless a strong economic recovery materializes.

Hedging its bets, Peters predicts any surpluses will take until the second half of 2003 to drive markets down thanks to the “war premium” generated for oil and gas prices by rumblings about attacks on Iraq. More bullish analysts at a Canadian rival on energy investment markets, FirstEnergy Capital Corp., suggest the North American gas market is headed towards a tipping point where prices are bound to head upwards.

By FirstEnergy’s calculations, based on surveys of producer quarterly statements and field activity, U.S. gas supplies are dropping by 3 Bcf/d this year and Canadian production capacity is declining by 400 MMcf/d. The result is projected to be tightening markets and upward pressure on prices, starting with the storage-withdrawal period of the forthcoming heating season, even if demand growth stays slow.

FirstEnergy says “given the limited supply options available to Canada and the U.S. in the next few years, less gas supply will mean lower storage levels to start each subsequent heating season. The result will be sustained strong natural gas prices. Another supply crunch is coming. There’s no getting away from that and the higher gas prices that will come with it.”

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