Warm winter weather normally means trouble for the gas industry,but for Northern Border Pipeline, which is attempting to completeconstruction of a major expansion/extension project, it has been ablessing. After a month and a half delay because summer rains setback construction, the pipeline company is expecting to have itsproject in service some time between Thursday, Dec. 17, and Sunday,Dec. 20, with the entire 700 MMcf/d capacity being fully utilized”almost immediately,” said Robert Hill, vice president of marketingand business development for the pipeline company.

“We’re probably the only party that [the warm weather] hashelped. It has made life tolerable,” he said in an interview. “Ithink we would have finished about on the same schedule had it beencold, but certainly it has been a big boost to the constructioncrews. And we’ve had no snow.

“We’re pleased that although we missed the Nov. 1 deadline wewill get it in service by Christmas and be ready to meet any needsthat might occur if there are cold snaps in January or February.”

When completed it will expand the capacity of the NorthernBorder system to 2.4 Bcf/d and extend the pipeline to Manhattan,IL, from Harper, IA, to serve local distribution companies andother shippers in the Midwest, primarily in the Chicago area. TheChicago Project was a massive undertaking that included theaddition of 303,500 hp of compression and 390 miles of new pipelinewhile the company maintained more than 1.7 Bcf/d of gas flow toexisting customers. It also involved directional drilling more than3,800 feet beneath the Mississippi River.

But the Northern Border delay was completely the result of badsummer weather. Torrential rains in early June, which left somelocations in central and eastern Iowa disaster areas, temporarilyforced the shut-down of construction. Ten miles of pipeline trenchwas filled with water. Northern Border made scoping changes, addedwork crews and equipment and spent more than the expected $840million on project construction, Hill said. But the pipeline willbe in service before the end of the year, which is something manyobservers doubted would happen.

“We’re planning to start loading and packing the new pipe withlinepack tomorrow,” he said Friday, “and that will take severaldays to pack it up. As you know, storage in the lower 48 and up inCanada is actually very full right now. The result is there isplenty of stored gas to flow the 700 MMcf/d out of Canada wheneverservice is initiated.

“If a shipper on our system decides not to nominate any gas, hecontinues to pay the bill, so that’s another incentive to nominatehis contract quantity. He balances the amount of gas he has instorage and the buried cost [he has] in Northern Border capacityagainst the attractiveness of netbacks. Bottom line is I expect tosee very high nominations almost immediately, and it would becertainly feasible for Canadian storage to support full flowsthrough Northern Border through the spring. I think that we canexpect it will stay up around 700 MMcf/d through the month ofJanuary and as long as it remains cold.”

Spring will provide a real test for Canadian deliverability,however. Once storage levels are reduced, the burden will fall onwellhead deliverability. “There has been lots of speculation aboutwhether the province [Alberta] is covering the decline rate. It iseveryone’s question-and no one has an answer-with regard to[whether] the new hook-ups of recent discoveries in the provincehave been set up so there is deliverability to pull on them usinggas well connections. That will be the true test of thedeliverability question. We’ll get the real answer in theMarch-through-April time frame.”

But Hill said he does not expect Canadian producers to have muchtrouble filling the new capacity on Northern Border or TransCanada,which is adding about 417 MMcf/d to its system this winter. “Iexpect we’ll continue to flow pretty close to 100%.”

On Northern Border, there will be a net increase of 700 MMcf/dcoming out of Canada at Monchy, SK, near the Saskatchewan-Montanaborder. With 10 MMcf/d being dropped off in the Dakotas, about 690MMcf/d of incremental gas will arrive at Ventura, IA, where it willbe joined by an additional 260 MMcf/d of gas that will be able toflow for the first time to Harper, IA. At Harper, about 300 MMcf/dwill be delivered to Natural Gas Pipeline. The rest, about 650MMcf/d, will go on Northern Border’s new extension to Chicago.

Observers will be watching over the next few weeks to see howmuch of a downward impact on prices an additional 700 MMcf/d ofCanadian gas will have. Some of the impact may already have beenimbedded in current prices, according to one observer, who saidmany Chicago gas buyers already see it as their “god-given right”to be offered $1.75/MMBtu for the rest of their lives.

“I wouldn’t say that is 100% true, but I, as an industrialbuyer, can say that with storage levels near full, weather mostlybenign (temps to be in the 50s this weekend in Chicago), it is anice time to be a buyer in the Chicago market,” said one Chicagoenergy supply manager.

Chicago prices spiked up to near $1.85 at one point last weekfrom $1.40 the week prior, but the supply manager said he wasn’tbiting. “Prices rocketed up from there and I stepped right back outof the market,” he said, adding Northern Border’s extension isworth the wait.

“Over half a Bcf of gas added to this Chicago market is going tohave quite a negative impact on prices, especially in the nearterm, with the warm weather we are experiencing,” he said. “In thelong term, there could be some serious changes in the Chicagobasis. It could trend to a negative basis.”

Any more supply into an already oversupplied market is”something we don’t need right now,” said one marketer. “I fullyexpect ANR and Northern prices as well as any pipeline that flowsgas into Chicago should see a major downward impact on prices atthis point.”

By 2000, it will be even more of a buyers’ market in Chicago.The recently approved Alliance project will be delivering anadditional 1.3 Bcf/d of incremental gas. Northern Border plans toprovide an outlet for some of the excess with a 35-mile extensionto NIPSCO’s system in Indiana from Chicago. Pending FERC approval,the extension will have a capacity to transport 545 MMcf/dinitially.

Rocco Canonica

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