Canadian exporters are well on their way to chalking up their 14th consecutive annual record for natural gas deliveries to the United States, according to records kept by the National Energy Board. Export volumes rose 10% to 2.88 Tcf in the first three-quarters of the gas contract year ending Oct. 31, compared to 2.62 Tcf delivered to the U.S. during the nine-month period of Nov. 1-July 31 in 1999-2000.

Despite the retreat by prices off their winter peaks, revenue gains continued. In the first three-quarters of 2000-01, gas exports fetched US$16.26 billion, 114.7% more than the US$7.57 billion received during the same period of 1999-00. Prices at the international border averaged US$5.61 in the first nine months of the current contract year, up 94.3% from $2.89 in 1999-00.

The price drop showed in July. Monthly export revenues slipped by 13.8% to US$993.8 million compared to $1.15 billion in July of 2000. Prices fell by 21.9% to an average US$3.06/MMBtu compared to US$3.92 in the summer of 2000, when the market’s steep climb to last winter’s spectacular peaks in the $9-$10 range was getting under way. Thanks to the spike on North American markets last heating season, export revenues for the current gas contract year already beat the annual record set in the full year of 1999-00. The US$16.26 billion received during November-July of 2000-01 topped by 44% the 12-month receipts of US$11.3 billion in 1999-00.

Among major destinations for Canadian gas, the reversal of market conditions showed most clearly in California during the first three-quarters of the current contract year. Nine-month deliveries to California fell by 17.6% to 429.8 Bcf from 521.8 Bcf in the first three-quarters of 1999-00.

Shipments to the Midwest rose 15.5% to 1.1 Tcf, as traffic rose to capacity on the new Alliance Pipeline to Chicago from northern British Columbia and Alberta. Exports to the northeastern states rose by 19.7% to 877.2 Bcf in the first three-quarters of the current contract year, as the Sable Offshore Energy Project and allied Maritimes & Northeast Pipeline made themselves felt on the continental gas market. Going in the opposite direction from California, the Pacific Northwest region of the U.S. increased purchases of Canadian gas by 19.3% to 450.3 Bcf. Canadians are already braced for a reversal on the revenue front over the next contract year. Among forecasts, a prediction by the Calgary oil and gas stocks boutique of Peters & Co. illustrated the new range: a NYMEX average of US$3.90/MMBtu for calendar 2001, followed by a drop to US$2.50 for 2002.

The Peters analysts said, “There is a widely held view, which we also believe, that a downturn in energy industry activity will result in a short cycle of low gas prices, followed by a sharp recovery. Natural gas price volatility for the next few years may be similar to the short oil price cycles of 1986-95…by mid-2002, supply declines and U.S. economic recovery should kick-start the next gas bull market.” The activity decline is spreading rapidly into Canada. In a new forecast, the Petroleum Services Association of Canada predicted a 21% decline in drilling. Well completions in western Canada are forecast to drop to 14,400 in 2002 from a record 18,200 this year, with gas drilling liable to fare worse than oil.

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