Less than two weeks after the tap was turned on the Rockies Express Pipeline LLC (REX) REX-West system, the pipeline last week was working its magic on the market, creating competition for the benefit of Rockies gas producers.

Deliveries from REX-West into ANR, NGPL and Northern Natural Gas (NNG) have reached 438,000 MMBtu/d. And as of last Wednesday’s scheduled flows, the NNG interconnect was at 92% of capacity while ANR and NGPL were at 28% and 14% capacity, respectively, according to Bentek Energy LLC.

Bentek’s analysis also indicates that most of the new capacity has been filled with gas pulled from other regional pipelines that had previously been moving the supplies into markets south and west of the Rockies. Natural gas prices in the Rockies have increased significantly, with Colorado Interstate Gas (CIG) prices only 32 cents/MMBtu below Henry Hub prices, according to ICE Day Ahead Indices traded on Jan. 22.

“This interregional pipe-on-pipe competition can be expected to intensify in the coming weeks, to the benefit of Rockies producers,” said Rusty Braziel, Bentek managing director. “REX-West is already starting to achieve the objectives of its anchor shippers, most of whom have significant gas production in the Rockies region.”

REX is the $4.4 billion system owned by Kinder Morgan, ConocoPhillips and Sempra Energy that will enable the delivery of 1.8 Bcf/d of supplies from areas in Colorado, Utah and Wyoming. This gas will ultimately reach markets in the Midwest and Northeast. Part of REX-West was placed into interim service on Jan. 12 (see NGI, Jan. 14), providing the ability for shippers to move gas from the Cheyenne Hub to interconnects in Nebraska and Kansas. REX-West will be finished when it reaches the Panhandle Eastern Pipe Line (PEPL) interconnect in Audrain County, MO. However, last week, citing adverse weather conditions, REX pushed back its timeline for completing the remainder of REX-West.

The company had projected that the remaining 213 miles of REX-West would be in full service in early February. REX now expects full service to the PEPL interconnect to be available in late February if the required regulatory approvals are received and the weather is favorable, according to an update last week. And service from the Echo Springs processing plant near Wamsutter, WY, which was to begin on Jan. 21, will be available on or about Feb. 4, REX said. It noted that it will post weekly updates every Thursday starting Jan. 31 or more frequently, if needed, as developments occur.

In early 2009, REX-East (Phase III) will extend the pipeline to Lebanon and Clarington, OH, and provide a delivery capacity of 1.8 Bcf/d. However, Federal Energy Regulatory Commission staff recently cast doubt over the timeline for REX-East, saying completion of the project’s final environmental impact statement could be delayed (see related story).

Bentek’s Weekly Rockies Observer service indicates that incremental Rockies production has been a negligible factor in new REX-West throughput. Instead, flows shifted from regional pipelines including Cheyenne Plains and TransColorado into the REX system. In addition, REX is pulling significant gas volumes from Opal, which might otherwise be flowing into Kern River, CIG or Northwest Pipeline.

According to Braziel, “It is still too early to be sure if these changes in the market are predictive. Whether these events are being driven primarily by transportation economics or other factors such as weather, mid-month contractual commitments or the fact that the PEPL interconnect is not yet in service remain open questions.”

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