Tight natural gas markets lift value of Canada’s exports; summer prices could hit $6

Gary Park, Petroleum News Calgary correspondent

The value of Canadian natural gas exports to the United States surged in the first two months of 2003 and shows no signs of slackening over the next 18 months, say U.S. and Canadian government agencies. Canada’s National Energy Board reported May 26 that shipments to the Lower 48 generated revenues of C$2.41 billion, compared with C$1.1 billion in January and February 2002. Average export prices of US$5.13 per million British thermal units soared far above last year’s US$2.41, even though volumes declined to 602.5 billion cubic feet from 643.6 billion.

A spokesman for the U.S. Energy Information Administration forecast that continuing pressures on supply, a spillover from tight oil markets and expected growth from the industrial and electric power sectors should sustain high prices through 2003 and possibly to the end of 2004. The EIA said an “exceptionally large current shortfall in natural gas storage relative to normal levels” will bolster near-term prices because companies will need to obtain “large amounts of gas from other uses in order to refill storage” for next heating season.

If the United States is hit with a sizzling summer there could be a mid-year price spike of US$6 per million British thermal units.

An EIA pipeline report said import capacity from Canada “appears to have reached a temporary plateau,” given that only 207 million cubic feet per day has been added since 2000, while 163 million cubic feet per day was recently scrapped.

“No additional new projects have been proposed to increase import capacity from Canada into the (U.S.) Midwest or Central regions through 2005,” the report said, but added that the U.S. Northeast could be an exception if offshore Nova Scotia has enough exploration success to support proposals for a combined increase of 2.11 billion cubic feet per day.