Natural gas price comparison

U.S. Natural Gas Imports and Exports — 2000 - Brief Article

Natural gas imports and exports continued to play a significant part in the U.S. natural gas market in the year 2000. Trade with North American neighbors, Canada and Mexico, dominated both import and export activities. In addition, imports of liquefied natural gas (LNG) from several international suppliers increased significantly. Some of the highlights from last year were:

* Net imports moved up to 3,538 billion cubic feet (Bcf) - an increase of 3.4 percent from 1999.

* U.S. exports increased by 49 percent to 244 Bcf.

* The price of natural gas imports rose sharply in 2000 to an average of $3.95 per thousand cubic feet (Mcf) for the year or more than 76 percent greater than the 1999 average of $2.24 per Mcf.

* For the first time since 1980, the average annual price of imported LNG was lower than the price of imported gas delivered by pipeline, $3.50 vs. $3.98 per Mcf ($3.20 vs. $3.90 per million Btu).

Trade with Canada

Natural gas imports from Canada reached 3,544 Bcf, an increase of 5.2 percent in 2000. They comprised 94 percent of total U.S. natural gas imports in 2000. Similar to U.S. domestic gas prices (Table 4), the price of natural gas imports from Canada moved up sharply in the second half of 2000 as average monthly prices rose from $3.05 per Mcf in May to $7.47 per Mcf in December (Table SR7). This brought the annual average price to $3.97 per Mcf for the year or more than 78 percent greater than the 1999 average of $2.23 per Mcf. Contributing to the rise in import prices was the record high natural gas demand in 2000 (Table 3).

The 5.2 percent increase in natural gas imports from Canada in 2000 reflected both an increase in U.S. demand and increased crossborder capacity of roughly 1.9 Bcf per day. In 2000 the Sable Island Offshore Energy Project (SOEP), which delivers gas from offshore Nova Scotia to New England and enters the United States at Calais, Maine, initiated operations in January. It reached its certificated capacity of 400 million cubic feet (MMcf) per day in August 2000. The Alliance Pipeline System crosses the border at Sherwood, North Dakota, and delivers gas from western Canada to the Chicago area. It began very limited operations in June and reached its full operating capacity of 1.3 Bcf per day in December 2000.

There are 24 principal entry points for Canadian gas imports into the United States which are grouped in this report into four regions: the Pacific Northwest, the West, the Midwest, and the Northeast (Table SR6). Imports into the West and the Northeast rose while imports to the Midwest and the Pacific Northwest declined from 1999 to 2000 (Table SR6). The Midwest, which had a slight drop (3 Bcf or 0.2 percent) from 1999 levels, continued to have the greatest percentage (38 percent) of total gas imports from Canada. Imports into the Northeast had the second largest volume with 1,005 Bcf. The Northeast region showed the largest year-to-year change. Most of this increase (217 Bcf) in 2000 was due to the opening of Sable Island. Import prices rose sharply in all four regions. The Pacific Northwest had the highest price at $4.28 per Mcf and the largest year-to-year price increase. As a result the Pacific Northwest surpassed the Northeast as the region with the highest import prices.

U.S. natural gas exports to Canada increased to 73 Bcf in 2000 from 38 Bcf in 1999. The average price of exports to Canada was $3.66 per Mcf, 55 percent above the 1999 price (Table SR3). Pipeline exports to Canada represented 41 percent of total U.S. pipeline exports in 2000. The United States exports natural gas by pipeline to Canada at four primary crossborder points, three in Michigan and one in Montana. In 2000, the largest increase (18 Bcf) occurred at St. Clair, Michigan. The Vector Pipeline with a capacity of 720 MMcf per day began exporting gas at St Clair in November 2000. The Detroit, Michigan, export point had the largest volume of exports to Canada in 2000 with 36 Bcf, compared with a total of 30 Bcf at St. Clair. However, by the end of 2000, monthly exports at St. Clair exceeded exports at any other point.

Trade with Mexico

During 2000 natural gas pipeline exports from the United States to Mexico climbed to 105 Bcf, surpassing the previous record of 96 Bcf in 1992. Along with the increase in volume, the average price moved up to $4.26 per Mcf, 87 percent above the 1999 price. Contributing to this rise in exports to Mexico is the continued growth of manufacturing facilities located near the U.S./Mexican border.

In 2000, the United States added three pipeline crossborder export points to Mexico bringing the total to nine. The new pipelines began operating at Alamo and McAllen, Texas, and Otay Mesa, California. These new facilities, operating primarily in the second half of 2000, accounted for over 55 percent of the increase in exports to Mexico in 2000. For the third year in a row, the principal point of exit for pipeline exports to Mexico was Clint, Texas, where 43 percent of U.S. pipeline exports to Mexico were shipped on the Samalayuca pipeline. Most of the exports at Clint are used to fuel the gas-fired Samalayuca power plants. Also in 2000, 418 MMcf of liquefied natural gas was sent to Mexico by truck. This is an increase of over 50 percent from 1999's level of 275 MMcf. The LNG crosses the border at Nogales, Arizona, and San Diego, California.

The United States imported 12 Bcf of natural gas from Mexico by pipeline in 2000, a drop of 43 Bcf from the previous year. This appears to be the result of the growth in Mexican industrial consumption, especially in the northern region of the country, and higher prices. The price of imports from Mexico was $5.43 per Mcf, compared with $2.14 in 1999. The primary entry point was Hidalgo, Texas.

Liquefied Natural Gas

During 2000, eight companies imported 226 Bcf of liquefied natural gas into the United States. This was the largest volume of LNG imports since 1979 when 253 Bcf of the fuel was imported from Algeria (Table SR7). In 2000, nine countries sent 100 cargoes to the two U.S. terminals located in Everett, Massachusetts, and Lake Charles, Louisiana. The facility at Lake Charles received 55 cargoes and 127 Bcf, while Everett took 45 cargoes and 99 Bcf.

Trinidad, which began delivering LNG to the United States in May 1999, was the leading supplier of LNG to the United States in 2000. Algeria, historically the leading supplier moved to second on the list of nine exporting countries in 2000. Two new suppliers, Nigeria and Oman, made their first deliveries to the United States in 2000, while Indonesia delivered LNG to the United States for the first time since 1986.

Together these latter three countries delivered nine cargoes totaling almost 25 Bcf. Malaysia, which sent one cargo to the United States for the first time in 1999, did not make any deliveries in 2000.

The average price of LNG shipments to the United States in 2000 was $3.50 per Mcf, compared with last year's price of $2.47. For the first time since 1980, the average annual price of imported LNG was lower than the price of gas imported by pipeline, $3.50 vs. $3.98 per Mcf. On a per million Btu (MMBtu) basis, the price comparison between the two natural gas fuels is even more noteworthy with LNG at $3.20 per MMBtu and pipeline gas at $3.90 per MMBtu.

LNG, like pipeline gas, is traded on a spot market and also sold by contracts with varying term lengths. According to reports filed with the Department of Energy's Office of Fossil Energy, the average landed cost of LNG from Trinidad at Everett, Massachusetts, in 2000 under an existing long-term contract was $3.15 per MMBtu. These reports also indicate that several spot transactions were delivered at Lake Charles from Trinidad and other locations at prices that exceeded $4.40 per MMBtu in 2000.

During 2000, the United States continued to export LNG to Japan by tanker. LNG exports to Japan increased to 66 Bcf from 64 Bcf. The price of these exports moved up sharply, averaging $4.31 per Mcf. This is an increase of 40 percent from last year. LNG is shipped from southern Alaska to Japan under long-term agreements that began in 1978 and have averaged over 60 Bcf per year since 1994 (Table SR9). For the third year in a row, the volume of LNG exports to Mexico increased, reaching 418 MMcf in 2000. Even with this sharp increase in 2000, U.S. LNG exports to Mexico remain less than 1 percent of total LNG exports.

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