Canadian gas exports take three-way hit

Gary Park

Natural gas is getting hammered on all fronts in Canada, with exports to the United States down in all categories — volume, value and prices — in May, the latest months for which statistics are available from the National Energy Board.

No change is expected for all of the summer because of record-high storage levels in the U.S. and Canada.

Shipments across the 49th parallel for May were 284.4 billion cubic feet, down only 0.7 percent from May 2005, but revenues slipped to C$2.02 billion from C$2.37 billion as average prices fell to C$6.65 per gigajoule from C$7.63.

For the first five months of 2006, export volumes were close to 1.44 trillion cubic feet compared with 1.56 tcf a year earlier, however revenues were C$12.52 billion, up C$130 million based on average prices of C$8.04 vs. C$7.34 for the January-May period in 2005.

The board said gas prices continued their decline through the summer cooling season as a results of North American storage levels, which were almost 30 percent above the five-year average.

“Even with the hot weather witnessed across much of the U.S., the demand for natural gas for cooling has been relatively low,” the pricing report said.

It also said gas prices remain “substantially disconnected from the traditional pricing relationship with crude oil … that is, rising crude oil prices are not significantly supporting natural gas prices.”

Industry sources say the current price of a thousand cubic feet of gas is estimated at roughly 1/13th a barrel of oil compared with one-seventh a year ago.

The board even doubts that volatility expected in the new hurricane season will cut into excess inventories.

An analysis by Earl Sweet, assistant chief economist at BMO Financial Group, cautioned that gas prices, despite a mild recovery, could soften later this summer as the market “focuses on the likelihood of very high inventories by the beginning of the heating season.”