Williston Basin Banking on Canadian Supply Shortfall
Williston Basin Interstate Pipeline Co. is in the midst of
upgrading firm transportation capacity on its system in
anticipation of supplying cheaper Powder River Basin gas to
shippers on Northern Border Pipeline, who it believes will be
deprived of economical Canadian gas supplies when Alliance Pipeline
goes into service in October.
"We feel that with the Alliance Pipeline coming on-line that
there's going to be an opportunity for shippers [Powder River
producers] to make use of a pretty good market on Northern Border"
at Glen Ullin in North Dakota, where Williston Basin interconnects
with Northern Border, to fill an expected shortfall in Canadian
gas, said Bill Kickert, WillistonBasin's transportation services
"I think they're going to be supply short in Canada at least for
a short period of time, if not for a longer period," with producers
unable to supply both Alliance and Northern Border, he noted. Signs
of a supply shortage have already been seen on the TransCanada
Pipeline system, and "I think Northern Border is going to see some
of the same," Kickert said.
"There's only a finite amount of gas in Canada, and I don't
think there's enough to feed all the pipelines. I think Alliance
will be fully subscribed...But some of the Northern Border shippers
are going to be looking for gas." Williston Basin plans to be there
to fill that void.
The window of opportunity to market Powder River Basin gas,
which primarily is coal-bed methane (CBM), at the Glen Ullin
interconnection will begin when Alliance "rolls in" and will last
until 2003 or possibly beyond, Kickert noted. In 2003, he said a
"pretty huge" number of contracts on Northern Border and Foothills
Pipeline will be up for renewal, at which time shippers "would have
the opportunity to change their receipt points" for gas. "That's
kind of what I'm hoping [for] is that if gas is available off of
our system, some of those Northern Border shippers may...decide to
move their primary receipt points downstream."
Kickert believes lower prices will make Powder River gas even
more attractive than Canadian supply. "...[I]f there is a tight
supply in Canada, the Canadian prices for gas are going to go up.
Northern Border shippers don't necessarily have to take gas from
Canada, even if it is available. They could take the cheaper gas
off of our system."
Williston Basin is "just pulling the final strings together" on
its first system expansion out of the Powder River Basin, which
would add 40 MMcf/d of transportation capacity by Dec. 1, according
to Kickert. It would loop about 45 miles of the pipeline's existing
system from a point called Recluse in Line Section 14 in northeast
Wyoming to its Belle Creek point in Montana. The open season for
the capacity closed in late June.
The pipeline, whose system is mostly located in North Dakota and
Montana, is planning a second project to add another 50-60 MMcf/d
to its existing system capacity of about 450-475 MMcf/d (peak-day
winter). "We plan to do some looping, but the majority of it will
be 80 miles of new pipe" extending from Williston Basin's Little
Beaver compressor plant in Montana to its Dickinson compressor
station in Line Section 1 in North Dakota. Kickert said the pipe
plans to file an application at FERC by the end of the year,
seeking project implementation by Nov. 1, 2001.
The "ultimate goal" of both projects "is to increase our
capacity for folks [Powder River producers] to transport gas
to.....Glen Ullin," he noted. "Our whole marketing strategy is to
grow our pipeline in step with the development of the Powder River.
We're not trying to build a huge pipeline. But yet at the same time
we want to make sure we're ready when the gas is ready."
More Powder River gas will become available, he said, as
producers move into the western part of the basin. "There's quite a
bit of production that's starting to ramp up there. It's really
fairly new yet. There are a lot of wells being drilled. [But] the
gas has really no way to get out." Williston Basin's sister
company, Bitter Creek Pipelines, is building a 16-inch pipeline to
gather gas produced in the western part of Powder River and
transport it to the eastern section of the basin, which has access
to interstate pipelines, Kickert said. Likewise, Big Horn Gas
Gathering (a joint venture between CMS, Enron and Northern Border
Partners) is planning to extend its line into Sheridan, WY, thereby
connecting both the eastern and western portions of the basin.