The 14th consecutive annual export sales record and the 2000-01 winter price spike drove the value of Canadian natural gas exports to a stellar high in the last contract year. Revenues leaped 72% to C$28.5 billion (US$18.6 billion) during the 12 months that ended Oct. 31 from C$16.6 billion (US$11.2 billion) in the preceding contract year, by the National Energy Board’s count.

Deliveries to the United States rose 9.3% to 3.826 Tcf in 2000-01 from 3.5 Tcf in 1999-2000. Prices at the international border averaged C$6.91 per gigajoule (US$4.48 per MMBtu) in the last contract year, up 56% from C$4.42 (US$3.21) during the preceding 12 months.

It was the second straight year of spectacular Canadian gains. The 1999-00 gas contract period’s export revenues of C$16.6 billion (US$11.2 billion) topped the 1998-99 performance of C$10.4 billion (US$6.9 billion) by 60%, when average prices rose 52% on sales volume growth of 6.6%.

The NEB scorecard also confirms that exporters are unlikely to continue the spectacular revenue growth during the new, 2001-02 contract year. As of last October, average prices at the international border were down by 55.5% to C$2.98 per gigajoule (US$2.04 per MMBtu) compared to C$6.71 (US$4.76) in the same month of 2000.

Sales volumes continued to grow steadily, however. Deliveries to the U.S. last October were 315.8 Bcf, up 4.3% from 302.8 billion during the same month of 2000.

Bullish forecasters, notably FirstEnergy Capital Corp., expect the price trough to be short-lived compared to previous cycles on the continental gas market. “Keep the faith,” vice-president Daryl Rudichuk urged investors at the Calgary Petroleum Club. The Calgary financial house predicts North American benchmark prices on the New York Mercantile Exchange will average US$2.80 per MMBtu this year — down from $4.04 in 2001 and $4.32 in 2000, but still better in 2002 than the $2.32 of 1999 and the $2.16 of 1998.

In FirstEnergy’s view, which differs only in detail from other Canadians such as rival Peters & Co. and the Petroleum Services Association of Canada, markets will likely tighten and start pushing prices back up in the fall as demand driven away by the 2001-01 price spike returns and supplies again fall behind due to slowed drilling this year. FirstEnergy calculates that US$4 is the “long-term equilibrium price” for gas, or its average value under foreseeable economic conditions if the spikes and troughs could be eliminated from the market.

The NEB scorecard on the 2000-01 contract year documents growth for Canadian sales in most export markets. Deliveries rose to the midwestern U.S. rose 14.2% to 1.491 Tcf, accompanied by a 46.2% increase in average prices to US$4.59 per MMBtu. Shipments to the northeastern U.S. climbed 17.8% to 1.150 Tcf, while prices paid by the region for Canadian gas rose 35.3% to an average US$4.88. Export sales to California dropped 18.4% to 558.9 Bcf in 2000-01, but the volume erosion was offset by a 78.4% leap in annual average prices to US$5.39.

Canadian gas deliveries to the U.S. Pacific Northwest rose 21.4% in the last contract year to 612.6 Bcf, and prices in the region jumped 68.4% to US$4.89. In the smallest and poorest performing export market for Canadian gas, the U.S. Rocky Mountain region, sales volumes fell 53.9% in 2000-01 to 13.3 Bcf and prices gained only 16.6% to US$3.32.

The string of 14 record sales years since the onset of energy free trade and deregulation in the mid-1980s have multiplied gas-export volumes more than five-fold. The Canadian share of the U.S. gas market has tripled into the range of 14-15%. The 2000-01 export revenues of C$28.5 billion (US$18.6 billion) were a 16-fold improvement on the mid-1980s low in the value of the trade, which bottomed out at an annual C$1.8 billion (US$1.2 billion).

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