Canada

With gas storage levels in the United States and Canada well above historical averages and possibly approaching record highs, there will be increasing pressure over the next few weeks for gas prices to come tumbling down. Just how long they will remain down, however, probably depends on the weather and the price of crude oil, which could go to the moon based on action over the last few days, analysts say.

With completed natural gas production numbers for 45 North American producers, Lehman Brothers analyst Tom Driscoll said Friday that second quarter U.S. natural gas production fell an estimated 4.8% or 2.3 Bcf/d to 45.2 Bcf/d from year-ago levels of 47.5 Bcf/d, and 0.4% sequentially from the first quarter. Even with stronger Canadian gas output, North American volumes fell an estimated 2.9% to 62 Bcf/d from 63.9 Bcf/d a year ago. One standout, however, are liquefied natural gas (LNG) imports into the Lower 48, which jumped an estimated 25% over 2Q2003 from 1.4 Bcf/d to 1.7 Bcf/d.

AltaGas extended its retail operations into Ontario with the C$23.2 million purchase of PremStar Energy Canada Ltd. and its subsidiaries ECNG Inc. and Energistics Group Inc. PremStar specializes in a low risk, fee-based business of bringing physical energy supply from the gas field directly to end use customers located primarily in Ontario. The company arranges transportation and supports customers with market information. The purchase includes C$22 million payable by way of 993,789 AltaGas Income Trust Units plus $1.2 million cash. A final agreement is expected by July 1. AltaGas’ current gas utility operations are located in Alberta through AltaGas Utilities Inc., in the Northwest Territories through the Ikhil Gas Project and in Nova Scotia through Heritage Gas Ltd.

AltaGas on Wednesday extended its retail operations into Ontario with the C$23.2 million purchase of PremStar Energy Canada Ltd. and its subsidiaries ECNG Inc. and Energistics Group Inc.

Canada’s National Energy Board concluded in a new report that the gas market in British Columbia is working well and both consumers and producers are making appropriate adjustments to higher gas prices. The Energy Market Assessment (EMA) found that natural gas prices in the province are now integrated with the North American gas market. In response to recent price increases, provincial consumers have reduced demand. Industries such as the forest products industry improved energy efficiency and increased their use of other fuels. Residential consumers reduced household consumption by improving energy conservation. In northeast British Columbia, producers have responded to higher prices by increasing exploration activity. However, the small size of the British Columbia natural gas market and the lack of a major storage facility near the Lower Mainland limit market flexibility in comparison with other major market centers, such as Alberta. Looking ahead, the potential exists to increase gas supply from northeast British Columbia and there is potential to find natural gas in other provincial supply basins, the NEB said. The EMA is available on the NEB’s website at www.neb-one.gc.ca.

Canada’s leading natural gas pipeline operator suffered lower net earnings from its natural gas transmission business in the first quarter, but lower net corporate expenses still propelled TransCanada Corp. to net income of C$214 million (C44 cents/share, up from C$208 million (C43 cents/share) for the same period of 2003. TransCanada blamed lower regulated returns on its Alberta and Canadian Mainline pipe systems, which cut gas transport earnings by C$9 million to stand at C$149 million.

KeySpan Energy Canada said it has started building a 52-mile gas pipeline in the Pembina area of Alberta to deliver gas to its Brazeau River gas plant. Current production in the area is severely restricted due to the lack of sour gas processing capacity. The pipeline, known as the Brazeau Northeast Gas Gathering System, is expected to be operational in August. The pipeline routing has been chosen to follow the development of the highly prospective Pembina Nisku edge bank play. It will be a combination of 6- and 8-inch diameter pipe with a maximum capacity of 28 MMcf/d and has been designed to transport sour gas containing up to 25% hydrogen sulphide. Gross capital expenditures will be $18.4 million. The KeySpan Brazeau River gas plant currently has sufficient capacity to process the full capacity of the pipeline.

TECO Peoples Gas has added its three-hundredth natural gas customer in the state of Florida. “We’re excited to celebrate this landmark event in our company’s growth,” said Kent Hobart, general manager for Peoples Gas North Region. “In fact, this represents a 50% customer increase since 1997.” In reaching the 300,000 mark, TECO Peoples Gas said it is Florida’s leading provider of natural gas. TECO Peoples Gas’ parent company TECO Energy is a diversified, energy-related holding company based in Tampa, FL.

Despite freezing conditions still dominating the weather picture across the northern half of the U.S. and Canada, the cash market was softer at nearly all points Monday. A few flat points, mostly in the Rockies, were exceptions as Northeast citygate plunges of more than 60 cents led overall price declines that were mostly between a nickel and 20 cents.