Most of the gas to be developed from northern Canada and Alaska probably will be routed to Chicago because “it’s about the only place that you can make a rational investment and expect a stable return,” according to a TransCanada PipeLines executive.
“If you put another 3-4 Bcf into Chicago, things will sort it out and you won’t see too much movement on Nymex. That’s one of the big reasons for why Chicago. Alternatively, why not California? I think most of us have seen that California is not liquid enough,” Robert J. Jones, director of eastern business development for TransCanada, told the LDC Forum last week. It is possible in the future California will want some of the northern gas and there will be pipeline expansions to accommodate the need, he added.
Jones predicted Mackenzie Delta gas would be flowing south at the rate of 0.8 to 1.5 Bcf/d by 2008. Flow from Alaska would approximate 4 to 4.5 Bcf/d beginning in 2010. Transportation would include a 400 MMcf/d expansion of Alliance Pipeline and a 3.5 Bcf/d expansion of a combination of TransCanada pipes. While he expects there to be adequate transport to Chicago, takeaway from that point is not so sure. The 750 MMcf/d Guardian pipeline comes on at the end of this year and there is a planned 400 MMcf/d Vector expansion in 2006. But that will not be enough.
Given new supplies of LNG arriving on the East Coast, Jones speculated that with the arrival of increased Canadian and Alaskan supplies, Midcontinent gas could be backed out of the East and Chicago to some extent. “I’m not sure where that Midcontinent gas is going to go, so I’m not sure it will happen in exactly that way.”
Jones and Brian Frank, president of BP’s Gas and Power Canada, agreed that much of the Mackenzie Delta production would be needed in Alberta as that province’s reserves decline. Frank, appearing on the same panel at the LDC Forum, said some of the U.S. demand growth will be met by an increase in LNG imports from 0.6 Bcf/d in 2001 to 2.3 Bcf/d in 2010, and by increases in eastern Canadian supplies. He projected East Coast production would go from 500 MMcf/d in 2001 to 1.5 Bcf/d in 2010.
As for LNG, while it may be difficult to site new receiving terminals, he expects existing ones will be expanded. BP, which has extensive production feeding into Trinidad’s gasification facilities, is actively seeking U.S. markets for its LNG.
As for Alaska, that gas will be needed, but currently there is not an economically viable transportation route. There may be some incentives coming out of the energy bill in the Congress that would aid the economics. Frank said BP currently is “route neutral.” The so-called “over-the-top” route would be the lowest cost route, but that one is dogged by environmental and political complications. (A U.S. congressional committee ratified a provision in proposed legislation today that would prohibit the over-the-top route. Canadian officials say according to NAFTA agreements the U.S. government should remain route neutral.) “There currently is more support for the southern route, but the decision has not been made,” Frank said.
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