Falling natural gas prices in North America led to a big drop in profits and revenues in the second quarter of the year for the Abu Dhabi National Energy Company, better known as Taqa.
The government-owned company recorded sales of Dh6 billion(US$1.63bn) in the three months to the end of June, a decline of 14.5 per cent on the same period last year.
Pretax profit also dropped, falling more than 20 per cent to Dh1.1bn but a favourable tax regime allowed net profit to creep up by 2.8 per cent to Dh446 million.
"It is clear the first half of 2012 has been a challenging period for the global economy, a fact that can be clearly seen in falling global commodity prices," said Carl Sheldon, Taqa's chief executive.
Henry Hub prices, the measure of the cost of gas in the United States and Canada, fell to a 10-year low in February. Driven by the rapid increase in supply resulting from new production techniques, Henry Hub averaged $2.354 per million British thermal units [mmBtu] in the last quarter, 46 per cent less than the same quarter a year earlier.
Despite production increases in Europe and higher prices for gas sold there, overall revenue at Taqa's oil and gas division declined by almost 5 per cent.
This contrasts with the company's performance last year, when surging oil prices offset the plunge in gas prices and full-year oil and gas revenue increased by 30 per cent on 2010.
Taqa responded to the continuing drop in prices by shutting down part of its dry-gas production in Canada, where its North American gas assets are located, and focusing its investment programme on its crude and condensate production assets. But the Canadian gas assets will not be divested, said Mr Sheldon, as the company believed prices would recover.
"We think the gas prices will come back," said Stephen Kersley, Taqa's chief financial officer. "All the commentators and many of the supermajors see the current price as something of a short-term blip and that prices in the $4 to $5 [mmBtu] range are feasible in the longer term."
North America's oversupply will diminish once gas import terminals - built when the US and Canada were still net importers - have been reconfigured to allow for exports. The US government this year granted permission for the first terminal to be converted.
Taqa expects it will take another five years before such export facilities exist for its Canadian gas, however.
Low prices have also boosted the petrochemicals industry in North America, which feeds on natural gas and could strain supply further.
iPad users can read the digital edition of business section as it was printed via our e-reader app.†Click here