Energy exports plunge--Value drop linked to gas prices
Chris Varcoe <a href=www.canada.com>Calgary Herald Saturday, May 03, 2003
Despite record crude oil production, the value of Canada's energy exports sank 18 per cent last year as natural gas prices slumped through most of 2002.
The National Energy Board says gross export earnings from selling natural gas, oil, coal and electricity dropped to $43 billion in 2002, down from $52 billion in 2001.
While crude oil output rose six per cent to a record 2.33 million barrels per day -- Canada is one of the 10 largest producers in the world -- natural gas production slipped slightly.
As well, gas prices plunged through the first half of the year, affecting the value of Canadian imports, according to the annual report released this week by the federal energy regulator.
"The reason we saw a decline in export revenues is directly tied to the (commodity) prices we received," Bill Wall, an NEB technical specialist, said Friday.
"Overall, our volumes are quite strong and increasing, especially for crude oil."
Canada's energy sector is a key driver of the economy, employing almost 300,000 people and accounting for six per cent of gross domestic product.
Canada is the largest oil and gas supplier to the U.S., outstripping rivals such as Mexico, Venezuela and Saudi Arabia.
For oil companies, crude production hit record levels last year as a new project started off the East Coast and oilsands developments expanded in northern Alberta.
Oil companies sold $17.6 billion of crude outside the country in 2002, up from $15.7 billion in 2001.
Crude prices averaged $26 US a barrel in 2002 as markets surged in the fall and winter due to geopolitical tensions in the Middle East.
The flow of oil from offshore Newfoundland and Labrador almost doubled with the beginning of the Terra Nova oil project and increased production from Hibernia.
In Western Canada, oil output also jumped, driven by a 25 per cent hike in synthetic crude coming from oilsands developments.
The report also highlighted the continuing decline of conventional oil production, which fell 5.2 per cent, as the Western Canadian Sedimentary Basin matures.
Unlike oil, Canadian spot prices for gas dropped last year, plunging below $2 a gigajoule last summer as demand fell.
"The reason gas prices dropped was a weakening North American economy, especially in the United States," said Roland George, senior principal with energy consultancy Purvin & Gertz in Calgary.
"If your economy is slowing down, your need for energy also slows down."
Prices remained soft until late in 2002, but soared above $14 a gigajoule in February due to tight continental supplies and cold weather.
Total Canadian gas production fell one per cent to 17 billion cubic feet a day. Drilling levels were slashed in 2002 due to the weaker prices, and the prolific Ladyfern gas field reported a steep decline in production.
Revenue from gas exports fell by almost a third to $26 billion, as gas prices were off 28 per cent from 2001 levels.
For electricity producers, power exports hit their lowest level since 1993. Power export revenues fell 57 per cent from a year earlier to $1.8 billion.