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U.S. Natural Gas Exports Continue to Climb
U.S. exports to Canada set their sixth record high in as many years, increasing by 3.6% at the same time Canadian exports to the United States continued on a downward trajectory, dropping by 4.7%.
Admittedly there’s quite a difference in the volumes, with Canada’s exports measured in trillions of cubic feet, while U.S. volumes going the other way are still in the billions, but shale gas production is helping to narrow the gap.
Pipeline deliveries from the United States into Canada set a record of 970.8 Bcf in 2012, up 3.6% from 937 Bcf in 2011, according to the latest figures compiled by the U.S. Department of Energy’s (DOE) Office of Natural Gas Regulatory Activities. Southbound Canadian pipeline exports into the United States went in the opposite direction, dropping 4.7% to 3.05 Tcf in 2012 from 3.20 Tcf in 2011.
More modest U.S. exports to Mexico and outbound LNG traffic raised total U.S. gas exports to all destinations to 1.62 Tcf in 2012, up an overall 7.5% from 1.50 Tcf the year before.
The 2012 performance set the sixth consecutive annual record for U.S. gas sales into Canada. The new volume record is double the total 485 Bcf of U.S. northbound exports in 2007.
Viewed in an historical perspective, the about-face in the gas trade pattern is spectacular. Annual U.S. gas exports to Canada have increased 32-fold since 1995, when annual northbound cross-border deliveries were a modest 30 Bcf.
Canadian pipeline deliveries to U.S. destinations last year were the lowest since 1997. The annual total of southbound shipments into the United States was down by 22% from the 2007 peak of 3.85 Tcf for Canadian exports.
Prior to a modest setback in 2003, when the total dropped 8% to 3.5 Tcf, Canadian gas exports to the United States set 15 consecutive annual volume records by tripling to 3.84 Tcf in 2002 from 1.27 Tcf in 1988.
The bygone Canadian growth was driven by abundant conventional gas reserves, primarily in Alberta, and 1985 federal-provincial agreements that inaugurated deregulation and free trade in oil and gas. The policies abolished decades-old restrictions that held supplies off export markets in the name of providing for future Canadian needs.
Conditions have changed drastically since the early 2000s. Aging Canadian conventional gas reserves have depleted, unreliable prices and high costs have held back development of big but remote shale deposits in Alberta and British Columbia, and domestic industrial consumption has increased at northern thermal oilsands extraction sites.
Canadian industry participants and analysts have lately been describing Alberta deliveries to Ontario and Quebec via TransCanada Corp.’s half-century-old eastbound Mainline as peaking supplies for mainstay traditional markets that are switching to U.S. production from closer shale sources.
About three-quarters of the growing U.S. exports flow north via a border crossing between Michigan and southwestern Ontario beneath the St. Clair River, DOE records show. The flows go to the nearby Dawn storage and trading hub for deal-making that sends U.S. gas into markets across Ontario and Quebec.
A recent decision by the National Energy Board (NEB) on TransCanada pipeline business restructuring proposals reinforced the view that change has arrived in the gas trade pattern. The ruling ordered a reduction in tolls for long-term firm delivery contracts on the Mainline in order to stop a worsening headache of excess capacity. But the NEB authorized TransCanada to charge any rates the market for transportation capacity will bear for short-term firm bookings and spot or interruptible deliveries.
U.S. traders also scored a banner year for southbound sales volumes. U.S. exports to Mexico jumped by 24.3% to 620 Bcf in 2012 from 498.9 Bcf in 2011. Total exports of gas from the U.S. to both of its North American trading partners rose by 10.8% to 1.59 Tcf in 2012 from 1.44 Tcf the year before.
Traffic in liquefied natural gas (LNG) all but evaporated. Tanker landings in the United States were halved to 174.6 Bcf in 2012 from 348.9 Bcf in 2011. U.S. LNG exports dropped to 9.3 Bcf last year from 16.4 Bcf in 2011. Re-exports of LNG arrivals from overseas likewise shrank, dropping 64.8% to 18.8 Bcf in 2012 from 53.4 Bcf the previous year.
As on domestic markets, gas prices took a beating across the North American trade board last year. Northbound U.S. exports to Canada fetched an average US$3.11/MMBtu at the international border in 2012, down 28.7% from the 2011 average of US$4.36/MMBtu. Canadian pipeline deliveries to the United States averaged US$2.74/MMBtu at the border last year, down 31.8% from US$4.01/MMBtu in 2011.
The annual average border price received by U.S. exports to Mexico last year was also down sharply at US$2.95/MMBtu in 2012 compared to US$4.18 in 2011.
The only price gains were in the tiny LNG trade. U.S.-sourced tanker loads fetched an average US$15.55/MMBtu in 2012, up 22% from US$12.75 in 2011. LNG re-export prices climbed 17.4% to US$10.96/MMBtu last year from US$9.34/MMBtu in 2011.
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