Rockies Express Pipeline LLC (REX) last Monday began service on the portion of REX-East from Audrain County, MO, to the Lebanon Hub in Warren County, OH, with capacity up to 1.6 Bcf/d. The majority of REX-East is now in service.
This section of REX-East includes interconnects to Natural Gas Pipeline Co. of America (NGPL), Ameren, Trunkline, Midwestern Gas Transmission, Panhandle Eastern, Texas Eastern, Dominion Transmission and Columbia Gas, with future interconnects to Texas Gas, ANR, Citizens and Vectren. The remainder of the 639-mile, 42-inch diameter REX-East eastward to Clarington, OH, is expected to be in service by Nov. 1.
Bentek Energy's Sam Duran said REX-East throughput began slowly with a little more than 80 MMcf/d last Monday, but the volume was jumping to about 720 MMcf/d last Tuesday. Very little gas was making it to Lebanon at that point, but that should change as the Texas Eastern interconnect at Lebanon becomes more active, he said. Most of the first REX-East deliveries were going to NGPL in Moultrie County, IL, and Midwestern in Edgar County, IL, along with a small amount to Dominion, Duran said. After Lebanon deliveries heat up, that should have a negative effect on Columbia Gas and Dominion prices, he added.
Justin Carlson, also of Bentek, said significant Gulf Coast pipeline maintenance during the first couple of weeks in July will blunt the early market impact of REX-East service. An outage of TGT's Fayetteville Lateral for the first 10 days of the month will cut drastically into that pipeline's Ohio Valley deliveries, Carlson said, which means REX-East has less competition in that market area at first.
Assessments of the early market impact of REX-East were murky last week because of mild weather in the Midwest and Northeast. They were also complicated by Panhandle Eastern and Trunkline announcing that operational issues would require them to limit deliveries to their respective REX-East interconnects as July began. The Trunkline constraint was lifted Thursday; the Panhandle Eastern limit was eased that same day but remained below the point's full design capacity.
A Rockies producer said there was no doubt that REX-East is displacing Gulf Coast gas to some extent and having the anticipated effect of strengthening prices in his region. He regularly tracks CIG basis (the Henry Hub price minus the CIG price) and said that while CIG stood at minus $1.53 as of June 26, the spread had tightened to 85 cents last week. However, he said it was impossible for the pipeline operators to tie in 1.5 Bcf/d of REX-East capacity so quickly after startup, and until northern weather starts providing a real test, "let's take a time-out for now" on making a call on REX-East market impact.
Although last Wednesday's gains in the region were smaller than on last Tuesday, the producer said it looked like REX was helping to keep Rockies spot prices a little better supported last week than in the general market. He didn't think transport constraints were enough to explain the modest Rockies firmness.
Some said a softer Chicago citygate is the most likely result from the early days of REX-East operation. A Houston-based marketer said Tuesday it appeared to him that REX-East was pushing Chicago prices lower, but that also was being influenced at that point by the area's cool temperatures. "It's a little early to judge" due to little weather-based load, he said. Also, there are a "lot of moving pieces" involved due to the activation of new connects with Midwestern, NGPL, Panhandle Eastern and Trunkline, he said.
When completed, the entire 1,679-mile REX system will have a capacity of approximately 1.8 Bcf/d, virtually all of which has been contracted under long-term firm commitments, the pipeline said.
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