The coming Foothills/Northern Border expansion will impact gasprices and gas flows in several ways, according to a new report byPIRA Energy Group. Foothills/Northern Border will carry 700 MMcf/dfrom Alberta to the Midwest. Completion is expected Nov. 1.

The Alberta-Midwest pipeline route will see the biggest impact.The price differential between Alberta and the Midwest is expectedto drop dramatically, PIRA said. Principle author of the studyThomas Howard said in the beginning producers won’t be able to fillthe entire pipe. “As wellhead supplies begin to meet, then exceed,the needs from all markets, local and downstream, prices in Albertawill decline again, widening the price differential,” PIRA said.

How quickly Northern Border fills with gas will help determinethe future of other, bigger Canadian projects, such as Alliance andViking Voyageur, which Howard said he’s not writing off. “The moresuccessful Northern Border is, the more they will want the big pipeand sooner, and the rougher it is handling Northern Border. themore it’s likely to delay a bigger pipe at a later date.”

Gulf Coast producers will see spot prices at Chicago weaken,mainly in off-peak months, due to the new gas supply carried byNorthern Border. As Northern Border raises spot prices in Alberta,the value of moving gas to California will shrink, and some volumeswill be lost. PIRA said the differential between Alberta andCalifornia will shrink but will remain within the range ofdifferentials of the past five years. Also, spot prices at thesouthern California border will be slightly higher than Louisianaonshore prices but will be little affected by flows of Canadian gasto the Midwest.

Howard said he was surprised to find the Midcontinent has moreoptions for moving its gas. Buffalo Wallow producers can go toCalifornia easily, and Arkoma producers have access to theNortheast and Gulf Coast, he said. “To me the surprise was how theMidcontinent evaluation turned out. My first gut instinct was theywould get hit penny for penny with what Chicago got hit by.”Instead, the report found Midcontinent prices will weaken by afraction of the decline in Chicago prices.

Backers of projects downstream of the Chicago hub could see somedifficulty moving their plans forward, said Paul Miller, marketdevelopment director for Northern Border. Speaking at the ZiffEnergy Group North American Gas Strategies Conference in HoustonTuesday, Miller noted Chicago gives Canadian producers the NorthAmerican pricing they’ve yearned for. They will be lessenthusiastic to support projects moving gas out of Chicago. Millernoted the differential between Chicago and New York is 29 centswhile the differential between Alberta and Chicago is $1.27.Projects to move gas east from Chicago are Eastern Express,Vector/Millennium, TriState/Millennium, ANRIndependents/MarketLink, and Spectrum. They have rates ranging from70 cents to 80 cents.

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.