NGI The Weekly Gas Market Report
El Paso Natural Gas “is willing to expand its system” to the California border if “sufficient support” for such a project can be demonstrated through long-term capacity contracts, the pipeline told FERC last week.
The pipeline’s comments were in response to a Commission inquiry asking El Paso to consider the feasibility of upgrading its proposed Line 2000 crude-oil conversion project to a system expansion to help ease the pipeline capacity crunch in the West (See NGI, Jan. 8, 2001). Daniel M. Adamson, director of FERC’s Office of Energy Projects, raised the prospect in a Jan. 3 letter to El Paso, saying that modifying the project “could assist the difficult situation” now facing the California gas market.
Specifically, the Commission has recommended that El Paso amend a pending application in which it seeks to acquire an existing 30-inch diameter, 1,088-mile crude oil pipeline from Plains All American Pipeline L.P., and convert part of it to natural gas transportation service. The line extends from McCamey, TX, to Bakersfield, CA. El Paso plans to convert to gas service a 785-mile segment from McCamey to Ehrenberg, AZ. El Paso proposed the Line 2000 project as a loop line to replace existing compression, and not as a system expansion.
However, “there are several ways that an expansion could be accomplished,” wrote El Paso Vice President Al Clark on Jan. 15. “El Paso could add compression to the proposed Line 2000 project, or it could replace or recommission the compression that the pending application proposes to abandon in place.” As a third option, he said El Paso could add new compression to its existing system or loop either the existing system or Line 2000 project.
The “preferable method will have to be determined by a careful analysis of the relative costs and a determination of where shippers want the capacity, i.e. where they want to put gas into El Paso’s system and where they want the gas delivered,” Clark said.
As a “first step” towards gauging market support for an expansion, he noted that El Paso on Jan. 12 posted 1.2 Bcf/d of California-bound pipeline capacity for sale effective June 1 of this year. The capacity currently is held by affiliate El Paso Merchant Energy, whose contracts expire May 31. When the posting results are known, “El Paso will determine whether another open season is needed to solicit expressions of interest in additional pipeline capacity to serve markets both into and upstream of California.”
If El Paso finds there is an “unmet demand for additional capacity” on its system, the pipeline at that time “will evaluate whether an expansion of the existing system or a modification of the Line 2000 project, or both, is the appropriate means of accomplishing the expansion,” Clark noted.
In the meantime, he urged the Commission to approve El Paso’s application for the Line 2000 project as it was filed. Not only will the project “increase the operational flexibility” of El Paso’s current system, but converting the line from oil to gas service will be a “necessary prerequisite” to any future expansion of the pipeline’s system, according to Clark.
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