MONTREAL ­ Advances in horizontal drilling constitutes “the joker in the pack” that changed natural gas dynamics in North America and dealt a good hand to Gaz Métro, the company’s CEO said Wednesday.

The drilling technology used to get natural gas from shale deposits has tapped new sources, opening up gas production just as the recession has lowered demand. Prices have plummeted.

“Over the last year, the price for natural gas offered by Gaz Metro is lower than that offered over the previous six years,” Brochu said.

That’s good news for customers and unit holders of a company that doesn’t make its money from supplying natural gas but from distributing it, Brochu said.

“Natural gas is competitive and competitive in all our markets and competitive compared to all other forms of energy,” Brochu told the company’s annual meeting.

Natural gas production in the U.S. has risen dramatically in the last two years, after being stagnant for a decade, largely because of gas from unconventional sources such as shale deposits, Brochu said.

Promising exploration is also underway in Quebec, in the St. Lawrence lowlands. Should production take place there, Gaz Métro is ideally positioned to distribute that gas, she said.

Despite the economic downturn, Gaz Métro’s adjusted net income in 2009 rose to $159.6 million, up $6.3 million over the previous fiscal year. And the company maintained its distribution to unit holders at $1.24 per unit in 2009.

Competitive prices also translated into a record number of new contracts in residential and commercial markets in Quebec in the first quarter of 2010, the company said. Those were up by about 15 per cent over last year.

Gaz Métro views 2010 with cautious optimism. A committee is analyzing responses to the federal government’s decision to change tax treatments for limited partnerships and income trusts. Discussions have begun with the Canada Revenue Agency, Brochu said.

"The intention is that the public investors would remain stakeholders of Gaz Métro,” she said.

“Regardless of the alternative chosen, it is expected to be effective on or around Sept. 30, 2010 in order to benefit for as long as possible from the attractive tax treatment provided by the current structure."

The company is also in discussions with Canadian and international banks about $800 million in financing for its Seigneurie de Beaupré wind farm near Quebec City, a joint venture with Boralex Inc..

And it is moving ahead with previously-announced plans to test a pilot project that would see heavy trucks use natural gas. Another project revolves around the biomethanation of organic wastes.

Low natural-gas prices have indefinitely postponed construction of the proposed $1 billion Rabaska terminal project near Lévis.

lmoore@thegazette.canwest.com