Canadian exporters scored an 18.7% revenue gain in the last natural gas contract year. But the period also ushered in a pronounced downturn in the volume of trade with the United States. Improved prices accounted for virtually all of the increase in the total value of Canadian gas exports in the 12 months that ended Oct. 31, show records kept by the National Energy Board (NEB).
Total revenues jumped to C$33.1 billion (US$32.4 billion) from C$27.9 billion (US$25.3 billion) in the 2006-07 contract year. Annual average prices at the international border climbed 18.5% to C$8.27 per gigajoule (GJ) (US$8.69/MMBtu) in 2007-08 from C$6.98 per GJ (US$6.78/MMBtu) in the previous gas contract year.
Pipeline delivery volumes to the U.S. from Canada rose by only a meager one-tenth of 1% to 3.708 Tcf in 2007-08 from 3.703 Tcf in 2006-07. Monthly trade data kept by the NEB show that after growing through the last heating season, export shipments tapered into a sustained contraction. By last May, the decline in export volumes hit 10.8% to 259 Bcf from 290 Bcf in the same month of 2007. The monthly slippage was 6% in June (to 274 Bcf from 291 Bcf), 9% in July (to 288 Bcf from 318 Bcf), 14% in August (to 291 Bcf from 338 Bcf), 11% in September (to 280 Bcf from 316 Bcf) and 11% again last October (to 278 Bcf from 313 Bcf).
Canadian industry analysts foresee no quick end to the export shrinkage. The trend is blamed on a combination of a slowing U.S. economy, rising American production led by shale gas development, flat to falling prices on an oversupplied international market, reduced drilling north of the border, and deterioration of aging conventional fields in Alberta, source of about four-fifths of Canadian supplies.
In a recent research note, Calgary investment firm FirstEnergy Capital Corp. calculated that western Canadian gas supply dropped by an average 640 MMcf/d to 15.7 Bcf/d during calendar 2008. About 620 MMcf/d or 97% of the decline was in Alberta, and the rest was in Saskatchewan. Emerging development in British Columbia partially offset the slippage. But northern deep drilling and shale gas remain too new to make a large difference or to generate reliable projections of supply results.
“Drilling and exploration activity has remained fairly robust in BC,” FirstEnergy said. “To the downside, soft prices, the credit crunch and the constantly changing rule book for Alberta’s oil and gas fiscal regime have heavily impacted the province’s ‘bread-and-butter’ shallow gas production.” Western Canada natural gas supply looks set to record more declines in the coming year, according to FirstEnergy. But because of the weakening economy and strong U.S. supplies, “the impacts on natural gas pricing” of the overall Canadian production slippage “will be marginal at best.”
The NEB’s scorecard on the 2007-08 contract year shows pipeline deliveries to the top Canadian export destination, the U.S. Midwest, grew by 4% to 1.55 Tcf from 1.28 Tcf in the same period of 2006-07.
Gas exports to California also grew, climbing 17% to 509 Bcf in 2007-08 from 434 Bcf in 2006-07. But Canadian pipeline deliveries to the U.S. Northeast dropped by 9% to 1.17 Tcf in the last gas contract year from 1.28 Tcf in 2006-07. Exports to the U.S. Pacific Northwest shrank by 4% to 464 Bcf in the 12 months ending Oct. 31 from 481 Bcf in the same period of 2006-07.
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