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A
AECO/NIT: Alberta Energy Company / Nova Inventory Transfer. An important storage and exchange point for Canadian natural gas located within Alberta. The majority of transactions occur at this point. Aeco is linked to the Empress delivery point by the Nova Gas Transmission Limited pipeline system and other delivery points to BC and the US border.

AECO Basis: Pricing differential between Aeco in Alberta and the Henry Hub (NYMEX), expressed in $US/MMBtu.

B
Bcf: Billion cubic feet of volume (natural gas), also 28,328,103 m³, also 1,073,347 Gj.

Bear Market: A market in which prices are declining

Bearish: One who expects a decline in prices.

Bull Market: A market in which prices are rising.

Bullish: One who expects a rise in prices.

Bundle-T Services: A Bundle-T arrangement is where the LDC only provides transportation services between a delivery point (see below Empress) and the customer’s installations. In such arrangements, the supplier invoices to the buyer the total value of the gas purchased and delivered during a given month. It is also called Service without transfer of ownership.

Buy and Sell Agreement: A Buy/Sell arrangement is where the LDC buys from the supplier at a delivery point (see below Empress), transports the gas to its franchise and then sells back the gas to the buyer at the LDC reference price. In such arrangements, the supplier will invoice or credit the buyer for the difference between the amount paid by the LDC and the contractual amount owned to supplier by buyer. It is also called Service with transfer of ownership.

C
CGPR: Canadian Gas Price Reporter. This monthly document is published by Enerdata.com and contains many commonly used natural gas price indices.

Compressor Fuel: An additional quantity of natural gas needed to supply the compressor stations that propel a quantity of gas along pipelines (such as TransCanada) towards a delivery point.  Fuel rates depend on pipeline efficiency and are published monthly by TransCanada.

Currency Effect: At today’s price levels, every US $0.01 move in the Canadian dollar, extrapolates to approximately a C $0.08 move in the Aeco pricing (Assuming a Henry Hub NYMEX price of Us $8.00/MMBtu).  The weaker the Canadian dollar, the higher are fixed prices in Alberta.

D
Decline Rates: Natural rate of decline in gas production per well through time.

E
EIA: Energy Information Administration.

Empress: A delivery point of natural gas near the Alberta/Saskatchewan border at the interconnect between the TransCanada Pipeline and the Nova Transmission Systems in Alberta. Although most transactions are sourced from Aeco, delivery usually takes place at Empress for Eastern Canadian buyers.

F
Field Receipts: Quantity of gas being produced and that is available on the gathering network.

Futures Contract: A legally binding agreement to buy or sell a commodity at a certain price and at a certain point and for a certain time in the future. The standard NYMEX natural gas futures contract is for 10,000 MMBtu (10,550 GJ or 278,400 m³).

G
Gigajoule: Equivalent to 10⁹ joules. A basic unit of energy that is used in the Canadian natural gas industry, roughly equal to 0.948 MMBtu (where 1,000 m³ = 37.89 Gj).

H
Hedge: A security transaction that limits potential unknowns and risks. In natural gas, a buyer can hedge its price by purchasing a futures contract, this protects them against potential increases in prices, increases its knowledge of what price he will pay and helps to determine budget stability.

Henry Hub: A US pipeline interconnect in Louisiana from which most NYMEX natural gas financial transactions are based.

L
LDC: Local Distribution Company such as Gaz Metro in Quebec or Enbridge and Union in Ontario.

Long Position: As it relates to the futures market, one who has bought a futures contract to establish a market position and must take delivery at the agreed upon price unless the contract is liquidated with an offsetting sale. Opposite of short position.

M
m³: Quantity contained in 1 cubic meter at a pressure of 101 kilopascals and a temperature of 15 degrees Celsius.

MMBtu:  Million British Thermal Units, roughly equal to 1.055 Gj.

N
Nomination: Daily delivered volume.

Nova Transport: Fee charged to transport gas from the Aeco delivery point in Alberta to export pipelines at the Alberta border (namely Empress) on the Nova Gas Transmission Limited pipeline system.

NYMEX: New York Mercantile Exchange.

R
Risk Management: Hedging the possibility of an adverse price move. Hedging usually entails locking in a fixed price in the futures market but can also include the use of financial products such as calls (price caps) and puts (price floors). A large number of financial derivatives are possible to make use of.

S
Short Position: As it relates to the futures market, one who has sold a futures contract to establish a market position and must make delivery at the agreed upon price unless the contract is liquidated with an offsetting purchase. Opposite of long position.

Speculator: In the futures market, an individual who does not hedge, but who trades with the objective of achieving profits through the successful anticipation of price movements.

Storage: Storage takes place either in depleted gas reservoir or other porous rock formations and are mainly located in northern US or southern Ontario. Their locations are often close to consumption areas.

T
Technical Trading: Traders that attempt to predict prices based on patterns and charts.

W
WCSB: Western Canadian Sedimentary Basin

Last modified on: 2008-01-04