CALGARY -- May 17, 2005 -- Powered by a strong energy sector, Alberta's provincial exports will expand by 7 per cent in 2005, more than doubling the pace of national growth, according to an Export Development Canada (EDC) forecast. However, EDC anticipates a 7 per cent contraction in 2006 - a reversal resulting from declining energy prices and stable or falling prices in other sectors. "In 2004, Alberta's economy sizzled with double-digit export growth recorded for energy, forestry, agri-food and industrial goods," says EDC Senior Vice-President and Chief Economist Stephen Poloz. "While we don't expect a repeat of last year's strong performance, Alberta's overall export growth should remain robust through 2005 before contracting in 2006." The petroleum and petroleum products sectors, accounting for 35 per cent of Alberta's total exports, will see sales increase to CAD 26 billion in 2005, a 14 per cent gain over 2004. Weaker prices will trim back petroleum export earnings by roughly the same percentage in 2006. Natural gas, Alberta's other key export, provided roughly 36 per cent of total export earnings last year. Foreign sales rose 6 per cent in 2004 to total CAD 23.4 billion ¿ an outcome that was held back to some extent by less robust price gains. Looking ahead, natural gas export sales are expected to rise by 2 per cent in 2005, followed by a 7 per cent slide in 2006 due to weaker pricing. Petroleum and natural gas represents over two thirds of Alberta's total exports, and with the inclusion of coal and electricity, energy exports posted a 15 per cent rise to CAD 46 billion in 2004. Combined energy sales are on track to rise 8 per cent in 2005, followed by an expected decline of 11 per cent in 2006 as both crude oil and natural gas prices retreat and natural gas export volumes decline. Nevertheless, an impressive CAD 40 to 45 billion in new capital expenditures related to oil and natural gas is still anticipated over the coming 10 to 15 years, and with the current high-energy-price environment many of these projects are being fast tracked. Favourable developments in oil and gas markets helped power total energy exports ahead by CAD 9 billion to CAD 65 billion during 2004. Substantial price gains for crude oil were at play last year and the price of West Texas Intermediate (WTI) looks set to add an additional USD 4 to 5 to the average price of a barrel of crude oil this year. "Over the longer term we expect to see a modest weakening in oil and natural gas prices," added Mr. Poloz. "As geopolitical uncertainty subsides, global inventories will rebound and Iraqi production will continue to come back on stream. These conditions lead EDC to predict that WTI will average about USD 45/bbl this year, while continuing to soften through 2006 - averaging USD 38.50/bbl for the year." Alberta's other major exports: industrial goods, agri-food, forestry, and machinery and equipment accounted for 10, 7, 5, and 5 per cent of total exports, respectively, in 2004. Exports of the first three sub-groups posted impressive double-digit gains in 2004 of 32, 21 and 23 per cent, respectively. An easing of some of the agricultural trade restrictions by the U.S. helped drive a sharp rebound for agri-food sales last year, particularly for grains and seeds. Machinery sales were lifted by improved demand conditions emanating in the U.S., particularly for agricultural machinery. Other types of machinery and equipment also reported gains due to solid demand in the U.S., China, Eastern Europe, Asia and Latin America. Further export growth of around 5 per cent is expected for machinery and equipment through 2005 and 2006. Meanwhile, the combination of a favourable pricing environment and robust Asian growth has helped deliver solid expansion in the industrial goods sector, led by industrial metals and mineral ores. Forestry product exports were aided by vibrant demand in China and solid U.S. housing activity, while also benefiting from price gains for resourced-based goods. The forestry sector will show mixed results this year with lumber sales likely to decline, while pulp and newsprint export shipments rise. However, most commodity prices are at or near their cyclical peak, suggesting that Alberta's export growth of raw and semi-finished goods will slow in 2005 ¿ a trend likely to continue through 2006. Nationally, the economy is expected to grow by 2.4 and 2.9 per cent in 2005 and 2006, based on good domestic economic fundamentals. In turn, Canada's export volumes should grow by 3 per cent in both 2005 and 2006. A copy of EDC's Global Export Forecast is available on EDC's web site: http://www.edc.ca/docs/ereports/gef/EFindex_e.htm EDC is a Crown corporation that provides trade finance and risk management services to Canadian exporters and investors in up to 200 markets worldwide. -30- Media Contact : Glen Nichols EDC-Public Affairs Telephone: (613) 598-2876 email: glnichols@edc.ca
