Vector Delay Confirms Market's Suspicions
Future shippers on the new Chicago-to-Dawn Vector Pipeline had
their fears confirmed last Tuesday when pipeline officials
announced that the start-up date for the project, which was
scheduled for Nov. 1 to coincide with the start-up of the
long-awaited Alliance Pipeline, would be delayed a month until Dec.
Vector officials blamed the delay on the excessive rainfall that
has hampered construction of the 270-mile, 42-inch pipeline, which
--- when completed --- would provide initial takeaway for about 700
MMcf/d of the 1.3 Bcf/d of western Canadian gas that will be
shipped to the Chicago market by Alliance. Alliance is due to begin
operations on Oct. 31.
After the announcement last Tuesday, Alliance officials noted
the line will have hook-ups with existing pipelines and LDCs
serving the Chicago hub that could pick up some of the slack
between Oct. 31 and Dec. 1.
Jack Crawford, Alliance vice president for public, government
and regulatory affairs, downplayed the impact of the Vector
start-up setback on Alliance. "We don't think [there will be] much
effect at all. We have been working closely with Vector. Our
connection with them, if it's not ready, is very close. We also
have five other connections with other pipelines and LDCs" at the
Chicago hub. Many shippers "understand [that with ] a startup the
magnitude of ours and Vector's, there are likely to be some bumps
The Chicago market's reaction to the news Tuesday was somewhat
unexpected. The Chicago basis for November widened from a plus
9.5-10 to plus 11-12 immediately following Vector's announcement.
That was contradictory to what you would think would occur, said a
Chicago trader for a large marketing company. "I was offering
index-plus gas today betting on the chance that [that] will come
off by the time bidweek rolls around," he said. The effect on the
market wasn't as profound as some would have thought, agreed
another trader. "In fact, Chicago prices actually strengthened on
the news. You would think that with the excess gas on the market
starting Nov. 1, the basis would have come off. The only thing I
can think is that people are betting on cold weather showing up in
the Chicago market on Nov. 1 as well."
The impact was short-lived. Dawn was back down to plus 31.5-32.5
Wednesday after hitting plus 36 the day before, a producer said.
And a marketer reported Dawn basis being offered at plus 30.5
Friday. "The panic is over," she declared. Meanwhile, Chicago basis
remained virtually unchanged around plus 11-12 through Friday,
another trader said.
The Vector Pipeline will ship much of the Alliance gas from the
market hub in Chicago to the hub at Dawn, ON, as well as provide
access to markets and storage in the upper Midwest. The line's
capacity will increase to 1 Bcf/d when the Highland Compressor
Station in Michigan is completed and has the potential to be
expanded to 1.5 Bcf/d, Vector officials said. But its initial
start-up delivery capacity will be 700 MMcf/d. The pipeline is
slated to serve key markets in Ontario, Quebec, and the U.S.
Midwest and Northeast.
Vector shippers were notified of the delay along with the rest
of the market last Tuesday, although many already had suspected the
pipeline wouldn't be able to adhere to its scheduled start-up date.
At an LDC forum in Chicago a few weeks ago, a spokesman for Vector
insisted the pipeline was on schedule, but then sources said he
showed pictures of parts of the pipeline underwater. "Folks who
were there knew what that meant."
Presently, more than 90% of the Vector line has been installed
and progress on the Springville compressor station is on schedule,
according to the company. The Dec. 1 start-up date allows adequate
time for any further weather impacts and for the extensive
commissioning and testing programs necessary, it said, adding
Vector is scheduled to begin filling its system in late October.
Sponsors of Vector include Calgary-based Enbridge Inc. with a
45% interest; Westcoast Energy Inc. of Vancouver, BC, with a 30%
interest; and Detroit-based MCN Energy Group Inc. with a 25%
Susan Parker, Roger Tanner