Future shippers on the new Chicago-to-Dawn Vector Pipeline hadtheir fears confirmed Tuesday when pipeline officials announcedthat the start-up date for the project, which was scheduled forNov. 1 to coincide with the start-up of the long-awaited AlliancePipeline, would be delayed until Dec. 1.
Vector officials blamed the delay on the excessive rainfall thathas hampered construction of the pipeline, which — when completed— would provide initial takeaway for about 700 MMcf/d of the 1.3Bcf/d of western Canadian gas that will be shipped to the Chicagomarket by Alliance. Alliance is due to begin operations on Oct. 31.
The announcement yesterday left many in the market asking themillion-dollar question: “where will that [Alliance] gas go?” inthe meantime. Alliance officials noted the line has connectionswith existing pipelines and LDCs serving the Chicago hub that couldpick up the slack between Oct. 31 and Dec. 1.
ÿAlliance’s Jack Crawford downplayed the impact of the Vectorstart-up delay on Alliance. “We don’t think [there will be] mucheffect at all. We have been working closely with Vector. Ourconnection with them, if it’s not ready, is very close. We alsohave five other connections with other [existing] pipelines andLDCs” in Chicago. Many shippers “understand [that with ] a startupthe magnitude of ours [Alliance] and Vector’s, there are likely tobe some bumps at beginning.”
Immediate market reaction to the news was somewhat unexpected.The Chicago basis for November widened from a plus 9.5-10 to plus11-12 Tuesday following Vector’s announcement. That iscontradictory to what you would think would occur, said a Chicagotrader for a large marketing company. “I was offering index-plusgas today betting on the chance that will come off by the timebidweek rolls around,” he said. The effect on the market wasn’t asprofound as some would have thought, agreed another trader. “Infact, Chicago prices actually strengthened on the news. You wouldthink that with the excess gas on the market starting Nov 1, thebasis would have come off. The only thing I can think is thatpeople are betting on cold weather showing up in the Chicago marketon Nov. 1 as well.”
Meanwhile Dawn prices, which one would have expected tostrengthen following the news, did so, as November basis widenedfrom low 30s to plus 36 yesterday following the announcement, aMichigan trader said.
The Vector Pipeline would transport much of the Alliance gasfrom the market hub in Chicago to the hub at Dawn, ON, as well asprovide access to markets and storage in the upper Midwest. Theline eventually will carry 1 Bcf/d, but its initial start-updelivery capacity will be 700 MMcf/d. The pipeline is slated toserve key markets in Ontario, Quebec, and the U.S. Midwest andNortheast.
ÿVector shippers were notified of the delay along with the restof the market Tuesday, although many already had suspected thepipeline wouldn’t be able to adhere to its scheduled start-up date.At an LDC forum in Chicago a few weeks ago, a spokesman for Vectorinsisted the pipeline was on schedule, but then sources said heshowed pictures of parts of the pipeline underwater. “Folks whowere there knew what that meant.”
Presently, more than 90% of the Vector line has been installedand progress on the Springville compressor station is on schedule,according to the company. The Dec. 1 start-up date includesadequate time for any further weather impacts and for the extensivecommissioning and testing programs necessary, it said, addingVector is scheduled to begin filling the system in late October tocomplete the commissioning of facilities.
Sponsors of Vector include Calgary-based Enbridge Inc. with a45% interest; Westcoast Energy Inc. of Vancouver, BC, with a 30%interest; and Detroit-based MCN Energy Group Inc. with a 25%interest.
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