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Tetco Gives Spectrum Project Another Try with Lower Rates

Tetco Gives Spectrum Project Another Try with Lower Rates

Hoping the second time is the charm, Duke Energy announced Wednesday an open season for 300,000 Dth/d of firm capacity on its proposed Spectrum Pipeline project. The open season will last from May 7 to June 4.

This is Spectrum's second open season. In 1997, Tetco, a Duke affiliate, offered capacity for the project, which would transport gas from Chicago to the Northeast, but "no one signed up," said Duke spokesman John Barnett.

This time around Tetco has lowered the transportation charge from 70 to 54 cents/Dth. Randy Riha, a Tetco spokesman, said this will be the lowest cost option for transporting gas in that direction. Other proposed pipelines that are designed to carry gas in the same direction as Spectrum are charging 70-80 cents/Dth.

Yet the question of transport cost justification still looms over Spectrum and all the other Chicago to Northeast pipeline projects. Using NGI's bidweek prices for 1998, the average Chicago Citygate price was $2.19/MMBtu versus $2.43/MMBtu at the New York Citygate, for a differential of 24 cents. With this low differential, buying from the spot market in New York would still be preferable to transporting gas from Chicago. Riha said the Spectrum will become cost effective, however, when the Alliance Pipeline goes into service.

"I think the market demand will start slowly, but once Alliance comes on, differentials will warrant companies moving gas that way through the lowest cost possible. We are offering 300,000 Dth/d and I think there will be a very strong market for it."

Bobby Evans, president of Tetco, added "We believe that customers seeking firm capacity with a 2000 in-service date to coincide with the in-service date of Alliance Pipeline will be particularly interested in Spectrum."

Tetco said it was able to achieve such a low transportation rate because it is not planning to install new pipe. Spectrum will reallocate capacity. This strategy also helps avoid environmental hang-ups, Tetco said. Additionally, the low Spectrum rate was achieved because of the implementation of Tetco's rate initiative that FERC approved last September (See Daily GPI, Sept. 3)

Up to 200,000 Dth/d of the capacity would be available in the fall of 1999 to provide transportation access from Midcontinent and Canadian natural gas sources via existing interconnects and from Gulf Coast, offshore Gulf Coast and Appalachian natural gas supply sources, Tetco said.

For details on the open season, call Randy Riha at (713) 627-4746.

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