Canadian natural gas exporters continue to make gains, defying consensus forecasts that their role as suppliers to “continental” North American trading will fade due to shrinking reserves and rising industrial demand in Alberta.

Pipeline deliveries to the United States scored a double-digit gain in the last heating season, according to the latest trade records kept by the National Energy Board (NEB). In the five-month fall and winter period of November 2007 through March 2008, export volumes climbed 11% to 1.7 Tcf from 1.5 Tcf in the same months of 2006-07.

Although the future course of Canadian exports is becoming a matter of some debate as volumes persistently refuse to drop, shrinkage continues to be anticipated by forecasters such as FirstEnergy Capital Corp., the NEB and Alberta’s Energy Resources Conservation Board. Predictions of the supply erosion, due partly to a 2006-07 drilling slump and partly to rising consumption by Alberta oilsands projects, continue to peg the expected supply drop in a range of 2-3% per year. Last winter’s growth is attributed to temporary factors such as backlogs in storage being sold off.

Other observers such as TransCanada PipeLines and Peters & Co., while not quarreling with the general view that productivity is bound to slip in aging gas fields, are pointing out that changes in the quality of production may be causing unexpectedly positive results in quantity. A slow shift is under way in the Canadian industry to deeper and increasingly technology-heavy drilling targets that are much more productive than old mainstay shallow deposits.

Whatever the underlying causes, Canadian exports plainly responded to demand increases and improved sales opportunities in all but one of the major export destination markets.

The exception was the northeastern U.S., where pipeline exports dipped 5% to 529.8 Bcf in November through March of 2007-08 from 560.2 Bcf in the comparable period of 2006-07.

Canadian heating season deliveries to California rose 19.2% to 216.4 Bcf last fall and winter from 181.6 Bcf in November through March 2006-07.

Exports to the U.S. Midwest jumped 27.2% to 216.4 Bcf in November 2007 through March ’08 from 181.6 Bcf in the same period of 2006-07.

Canadian 2007-08 heating season gas deliveries to the U.S. Pacific Northwest rose by 1.8% to 210.1 Bcf from 206.3 Bcf a year earlier.

The volume increases more than made up for unfavorable exchange rate trends that have cut the value in Canadian currency value of all commodities traded internationally in U.S. dollars.

Until the past 18 months, items that sold for US$1.00 were worth up to C$1.40. With the currencies now virtually at par, Canada’s old exchange rate premium has disappeared. The movement of the loonie and U.S. dollar to parity effectively worked out to price cuts for Canadian exports since 2006. Lingering effects of the exchange rate shift continue to register on the NEB’s gas trade records.

In American currency, average prices fetched by Canadian 2007-08 heating season exports at the international boundary rose 11.6% to US$7.96/MMBtu from $7.13 in November through March of 2006-07.

Volume increases combined with the price improvement to result in an American-dollar export revenue gain of 24% to US$13.8 billion for the 2007-08 heating season from US$11.1 billion a year earlier.

Measured in Canadian loonies, the average price fetched by 2007-08 heating season gas exports dropped 4% to C$7.40/gigajoule from C$7.72/gigajoule in November through March of 2006-07.

Volume gains were just strong enough to compensate for the currency value shift and generate modest Canadian dollar gas export revenue gains. Exporters received C$13.8 billion from the trade in the 2007-08 heating season, up 6.5% from C$12.2 billion in November through March of 2006-07.

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