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Commercial Service Delayed, But Alliance Already Ramping Up

Commercial Service Delayed, But Alliance Already Ramping Up

After months of speculation in the industry, Alliance Pipeline confirmed last week full commercial service will be delayed nearly a month until Oct. 30. When construction of the system was scheduled nearly three years ago, Oct. 2 was the target date for commercial service.

However, the delay doesn't mean the market won't be getting any Canadian gas out of Alliance until the end of October. The pipeline opened one of its Chicago delivery valves last Thursday and started selling 50-100 MMcf/d of gas into the market. It intends to increase its sales each week eventually reaching its full 1.325 Bcf/d load prior to switching to commercial service on Oct. 30, said spokesman Jack Crawford.

"We got Commission approval to actually sell our test gas. Right now I think we are dealing with three or four different marketers. Our initial deliveries right now are into the ANR system. That's because its basically the only connection that is ready, but over the next few weeks we expect they will all be ready to go and we will test them all.

"I'd be surprised if it ends up being regular [volume increases of 100 MMcf/d each week] but that's kind of the game plan," said Crawford. "On Oct. 29 it will be Alliance selling [1.325 Bcf/d of] test gas, and on Oct. 30 it will be shippers nominating at one end and delivering at the other. The market may not see much of a difference. We obviously don't want to start charging our shippers until we have the confidence that all the systems have been checked out."

The pipeline system is designed to deliver gas from producing regions of northeastern British Columbia and northwestern Alberta to the Chicago area where the line interconnects with the North American pipeline grid. Currently, more than 99% of the total pipeline system has been installed, including 14 mainline compressor stations, 37 receipt points in British Columbia and Alberta, and seven delivery points in Illinois. Commissioning activities commenced in March, including the flowing of gas into the completed sections of line to purge air from the pipe. At present, 95% of Alliance has been purged of air. This includes all the mainline portion of the system (1,857 miles) from near Gordondale, AB, to the delivery section near Joliet, IL, and about 306 miles out a total of 434 miles of laterals on the receipt portion of the system. To date, 6 Bcf of gas is in the commissioned mainline and lateral portions of the system, with the ultimate line pack targeted at 8 Bcf.

Crawford said there were a variety of factors that contributed to the delayed start-up. "The rain in Saskatchewan delayed us a bit back in July but we managed to catch up on the construction there in August. But it then meant that some of our commissioning didn't get going until a little bit later. Farther west in Alberta and BC in fact we've had a couple of rain problems. In particular, we have one relatively small but fairly long lateral that we haven't even been able to get on the right of way yet and that's because of rain.

"Up in BC we've been having trouble with a directional drill of a creek on one of our laterals," he said. "We're likely to get approval to open-cut that creek, but that will take us probably the better part of a month.

"On the downstream end, we had hoped to get more of our downstream connections right now. We are testing one but some of the others aren't quite ready yet. We're ready, but they are not. Then of course there is a fairly complex interaction between the pipeline and the [Aux Sable liquids] plant. We haven't had a chance to work on that yet. So when you look at all of those things, the question was when could we establish a date when all this stuff would be done and we would be operational. We spent a fair amount of time with our shippers and they mentioned one other pipeline that was being delayed one day at a time drove them to distraction. We agreed we would pick one of three dates, all Mondays: Oct. 2, Oct. 16 or Oct. 30, and we just had to pick one that we felt confident in."

Besides the timing of service, there has been another important question on the minds of many market observers. Will the gas Alliance ships Oct. 30 be incremental gas or gas that would have been flowing through TransCanada.

"I don't think it's going to be purely either way," said Crawford. "Lots of guys are targeting for Nov. 1 to bring their new gas on to start the gas year so it all depends on how much shows up. It's not a big secret that we've had some wet weather and some of the drilling and completion work hasn't got done. That's likely to have some affect on it as well. That's a delay though. How long are people going to pay $6 for gas? Boy people are going to have a lot of money for drilling and projects."

Rocco Canonica

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