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New Pipeline Giant Begins Service

New Pipeline Giant Begins Service

With ceremonial taps on two cordless computer mice to power up the high-tech control room in Calgary, Alliance Pipeline entered service amid forecasts that it will rapidly be put to full use. Alliance did not immediately announce the opening amount of gas in its 2,300-mile route from Fort St. John in northeastern British Columbia to Chicago. But industry sources said it was filling up rapidly after curing startup glitches that postponed the event for a month, with about 800 MMcf/d flowing or 60% of its scheduled volumes. The line was installed with ability to take up to 1.5 Bcf/d in order to guarantee service on its 1.325 Bcf/d in long-term, firm transportation contracts.

Alberta Premier Ralph Klein, who wielded one of the mice while Calgary Mayor Al Duerr tapped the other one, put the issue raised by Alliance in a nutshell. "The challenge now is for producers to step up to the plate and deliver the gas," the premier said.

The producer community remained much more optimistic that it will put all its export capacity to use sooner than expected by skeptical observers including financial analysts and the Canadian Energy Research Institute. "It's extremely busy out there right now," said Pierre Alvarez, president of the Canadian Association of Petroleum Producers. CAPP projects a year-2000 total of 9,000 gas wells in western Canada. The figure will be a record that represents a nine-fold acceleration of the drilling pace only 10 years ago, when Canadian prices were severely depressed in a range of C70 cents to $1/Mcf (US48-68 cents) by a glut of "trapped gas" owed to shortages of long-distance pipeline capacity that ultimately stimulated a producer group to launch the Alliance project.

Producers continue to be vigorous supporters of Alliance, enthusiastically endorsing its in-service inauguration amid record prices made possible by capacity additions that established connections between Canadian and U.S. markets. "If you're going to bring on a pipeline, today's the day to do it," Alvarez said. Gas producers are not alone in being more optimistic about their ability to ramp up output than the industry analysts.

At TransCanada PipeLines, which is expected to experience the space surplus resulting from Alliance, president Doug Baldwin estimated excess capacity on the system will average one Bcf/d this heating season - just half to two-thirds of the amount forecast by the pessimists. Producers caution against discounting their ability to increase output too much on the strength of past performance. The pessimistic forecasts project a continuation of a pattern of low-cost drilling for small reserves on the western prairies.

The projections downplay the likelihood of a significant shift in the drilling pattern to costlier, deeper but much more prolific wells along the foothills of the Rocky Mountains and in northern Alberta and B.C. Alvarez said that while CAPP's year-2000 projections show a 53% in low-cost drilling in Saskatchewan, they also point to a comparable acceleration in the foothills and northern regions. The mid- to late-1990s reliance on cheap shallow drilling just reflected the depressed gas and oil prices of the period, CAPP maintains. The difficulty of predicting Canadian production capacity is being compounded by a spreading reluctance to disclose drilling plans and output targets. Canadian producers have been repeatedly burned on skittish stock markets for even narrowly missing declared objectives.

Gordon Jaremko, Calgary

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