Strong Demand Holds Load Factors High Despite Alliance
The introduction of the 1.325 Bcf/d Alliance Pipeline into the North American gas market appears to have had less of an impact on gas flows out of western Canada than expected, according to representatives of TransCanada PipeLines, PG&E Gas Transmission and Alliance. Extremely strong gas demand in the Pacific Northwest, California and in the Midwest has produced continued high load factors on TransCanada and PG&E GT-NW despite the presence of their huge new rival for Western Canadian supply.
"The contract picture changed significantly on [TransCanada] since the first of November and primarily at our Empress, AB, delivery point into the TransCanada mainline from the Alberta pipe, but actual physical mainline gas flows [at about 6 Bcf/d compared to a total peak capacity of 7.2 Bcf/d] have not changed correspondingly," said Klaus Exner, director of pipeline system operations at TransCanada. "The big picture overview that I would give you is that demand is very high in the Pacific Northwest and California and we continue to run at the highest possible load factor down that leg of our pipeline system out of Alberta, through British Columbia and into the PG&E systems. That hasn't let up at all and we don't foresee that letting up."
PG&E Gas Transmission Spokeswoman Sandra McDonough said PG&E GT-NW has been running full at 2.6 Bcf/d for some time and is delivering 900 MMcf/d to non-California load in the Pacific Northwest. "We're turning back demand right now. Every power plant in this region is running full tilt. Tuscarora [Gas Transmission], the Nevada pipeline, is full. Our Northwest deliveries are fixed. We're delivering as much as we can deliver right now." She said the pipeline probably would be planning an expansion relatively soon.
The other two major routes out of the Western Canadian Sedimentary Basin, the Foothills and Northern Border route into the Midwest and the Mainline route across the Canadian prairie in Saskatchewan and Manitoba, also continue to operate at high load factors.
"We didn't see a huge drop-off in physical flows post Nov. 1. We've seen the IT volumes come up considerably," said Exner. "The one thing that has changed is the volatility of the flows. Customers are making frequent intraday nomination changes and we're seeing more up and down and day-to-day variations, according to the weather and the markets, than we would have when we had a higher firm contract level. The fluctuations are driven purely by the price differential between AECO and the Dawn Hub in Ontario, which indicates whether or not interruptible flow on the mainline is in the money or not."
David Cornies, TransCanada's director of pipeline system design, said throughput on the mainline "definitely is higher than we expected and what has happened is that demand and price are such that storage is flowing at very high rates and is making up the deficiency that would result from the fuel supply loading into Alliance.
Cumulative decontracting on TransCanada reached about 1.6 Bcf/d in November. However, throughput has declined by only about 1.2 Bcf/d. About 5.8 Bcf/d of gas was flowing last week at Empress, AB, on the TransCanada mainline while firm capacity under contract was about 5.5 Bcf/d. Additional supply in Saskatchewan brought mainline throughput last week to about 6 Bcf/d, which is down from about 7.2 Bcf/d at the same time last year.
"We were seeing 1.6 to 2 Bcf/d of gas coming out of storage this week and that's huge, so that's a big reason why the volumes are staying a lot flatter than we expected," said Cornies. Few observers would have expected these kinds of market and weather conditions looking back at the past three winters, he noted.
Alliance Pipeline spokesman Jack Crawford said the Alliance system has been running flat out at about 1.325 Bcf/d since the valves were opened for commercial service Dec. 1. He also said the pipeline soon would be testing to increase flows on the system. It has been estimated that Alliance could increase gas flows to 1.5 Bcf/d with existing compression. The additional capacity would be divided up among existing shippers, Crawford said. "We haven't cranked up the system above the contract capacity yet. We probably won't do that for a couple weeks until we get things ironed out. Frankly though, I'm not sure Chicago is their best market right now given the pricing in the Pacific Northwest and California."
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