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EIA Sees Major Turnback Activity Through 2003

EIA Sees Major Turnback Activity Through 2003

Some of the "most pronounced" turnback activity for long-term firm capacity can be expected this year and next, according to an analysis of the pipeline transportation market issued by the Energy Information Administration (EIA) yesterday.

The EIA predicts that 8 trillion Btus per day, or 9% of long-term contracted capacity, could be turned back to pipeline companies between 1998-2003; 6 TBtus/d in 2004-2008; and 3.8 TBtus/d in 2009-2005. All told, 17.8 TBtus/d of daily capacity will likely be returned to pipelines over this period, it said.

That's about one-fifth of the total 97 TBtus/d of firm capacity under contract on July 1998 on 64 pipelines that were included in the EIA analysis. The analysis, "Contracting Shifts in the Pipeline Transportation Market," is part of an upcoming EIA report - "Natural Gas 1998: Issues and Trends" - that's due to be released later this month.

Not surprisingly, the EIA reports the Midwest likely will face one of the largest exposures to turned-back capacity, particularly in the 1999-2003 period. In the Midwest, it sees contracts for about 11.7 TBtus/d of pipeline capacity expiring during that timeframe, or about 56% of the capacity that was under contract for that region in mid-1998. The anticipated contract expirations in the Southwest and Central regions are likely to be even more significant, however. The EIA projects 68% of the capacity currently under contract in the Southwest will expire by 2003, and that will be followed by 60% in the Central region.

The big surprise was the Northeast region, which came in with one of the lowest contract expiration rates for the 1999-2003 period. The EIA estimates about 12.8 TBtus/d of pipeline capacity will expire in the Northeast during that timeframe. That's about 40% of the 32 TBtus/d of capacity that's currently under contract for the Northeast region. The Southeast region had the only lower rate, with about 32% of existing capacity under contract expected to expire.

The EIA analysis did not assess how much of the anticipated turned-back capacity will be remarketed. However, it did note that even if all of it were remarketed, some loss of pipeline revenue would occur because pipes would need to offer discounts to attract new buyers and might not be able to recover their capital costs.

The analysis, plus other chapters of the EIA report, can be accessed through the agency's Internet site at www.eia.doe.gov/.

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