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About Natural Gas (NG)
As Canada becomes an increasingly significant supply source of
natural gas, the need for a reliable transparent pricing mechanism
for gas coming into the United States from Canada has increased
as well. The Exchange launched its third set of natural gas contracts
and its first foreign-delivered futures contract, based on delivery
in Alberta, Canada, on September 27, 1996.
Alberta accounts for 90% or more of Canadian natural gas production
and is the source of most of the Canadian gas exports to the United
States. With changing supply and demand dynamics and transportation
logistics, prices in certain regions throughout North America
have at times diverged from those in the U.S. Gulf Coast. The
Alberta market is one such area, as natural gas prices in Alberta
have become more and more heavily influenced by regional fundamentals.
On the U.S. Gulf Coast, gathering and trading is scattered on
numerous gathering systems, intra and interstate pipelines, and
corresponding pooling points. While the U.S. Gulf Coast market
is larger in overall size, there is a higher concentration of
gas in one single "pooling point" in the Alberta market.
Couple this with the Nova inventory transfer (NIT) mechanism,
which facilitates multiple transfers of the title of gas on the
Nova system, and the volume of trading is significant.
The specified delivery location for the new futures contract
is Nova Gas Transmission's Ltd.'s pipeline system via inventory
transfer or, upon mutual agreement between buyer and seller, at
designated interconnects with Nova which include Alberta Energy
Corp.'s AECO-C, CrossAlta's Crossfield, and CU Gas Ltd.'s Carbon
hubs.
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