New U.S. Natural Gas Pipeline Displacing Canadian Gas 27 comments
Keith Schaefer
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A new natural gas pipeline in the United States is allowing cheap gas from the Rockies to displace more than 10% of Canada’s gas exports to the Midwest US, forcing more Canadian gas into storage and lowering natural gas prices for Canadian producers.
The 1,679 mile, $4.4 billion Rockies Express pipeline, or REX, is providing about 1.5 billion cubic feet per day (bcf/d) of cheap gas from the Rockies through the Midwest to Ohio. The latest section of REX just opened June 29 (www.rexpipeline.com).
The new pipeline is displacing about 600 million cubic feet per day (mmcf/d) of Canadian production, says Jack Weixel, director of Energy Analysis for Bentek Energy. Bentek provides specialized energy pipeline information to clients in the oil and gas sector in North America. Weixel estimates the mid-continent corridor of pipelines send just over 5 bcf/d of gas, net, to the US from Canada (some western Canadian gas goes back into Southern Ontario via Michigan).
“It has pushed off about 600 million cubic feet per day off the Northern Border Pipeline, which runs into Midwest pipelines at Ventura, Iowa,” Weixel told me over the phone from his Colorado office.
“REX is flowing at 1.5 bcf/d, which has forced some (Canadian) gas up the northern natural gas pipeline.
“And Rockies gas is cheaper than Canadian gas. REX is more efficient versus the Northern Border (Pipeline), an older pipe that serves Ventura.”
Weixel said the price for Rockies gas has always been low, with a lack of pipelines out of the area. Now that cheaper gas is being pushed farther east with REX, and pushed back Canadian gas.
“REX has helped increase Canadian gas storage quite significantly,” Weixel says. Previously, the natural decline of gas production in Canada helped keep natural gas prices high at the Edmonton AECO hub. But then came horizontal drilling, shale gas, and the REX pipeline.
“Even in face of declining production you (Canada) are now increasing storage, which is a pretty big shift,” Weixel says. He estimates Canadian production is down 1 bcf/d since January 2008.
It’s relatively cheap to move natural gas around the US, whereas transportation costs (read: pipeline) down from Canada is making Canadian gas less competitive. Pipelines on both sides of the border are regulated, says Weixel, and get a fixed return, but there is more competition in the US so costs are lower. And a new pipeline simply has lower operating costs than an older one - as REX vs. the Northern Border Pipeline shows.
Normally Canadian gas would flow through to the big consuming area of the US Northeast, but that market is having a lot less demand this year. Weixel says he sees slightly less Canadian gas being pushed off the grid in the fall, but adds that Canada needs to go find new markets for its gas.
“The US has solved its own problem, and we are less reliant on Canadian gas. It’s still an important part, especially in the Northeast, but not so much for Midwest or California.” A new pipeline, called RUBY, is already being planned to take Rockies gas to California - another big market for Alberta gas, Weixel says.
The Liquid Natural Gas export terminal from Kitimat, on the west coast of British Columbia, is a great idea for the Canadian industry he says. Alberta needs to do more to develop export markets for its natural gas.
Before ending our call, I asked him for his outlook on natural gas prices in North America.
“We could see US$2 gas (per mcf). It’s definitely possible. We haven’t seen the production declines down here yet. Rigs are dropping but they are more efficient now. And the success rate is much higher in drilling wells into these new shale formations. (The production decline) is coming, but not as foretold as everybody thought it would be.”
This is why I am keeping my portfolio in oil weighted energy stocks for now.
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This article has 27 comments:
At the risk of missing the trade, I'm waiting for what would be an impressive final shake-out. I assume there is an limit to how much we can store underground. (Can anyone confirm/quantify that?) Assuming that is correct, given trajectory of storage, it would seem possible we hit that before getting to the fall extraction period. Then NG price would collapse. I would buy that.
Nat Gas is THE answer for transportation. If utilized it would depress the price of oil and those Mid East potentates could go back to their former profession of herding goats.
get on board andwrite your congressional reps.
act out your frustration.
scurry, PRARIEDOG555, they've heard you in DC.
On Jul 09 07:58 AM prairiedog555 wrote:
> This really pisses me off, I hear about the abundance of Nat Gas,
> and I voted for these lying jerk Democrats because I thought they
> would try to do something about the foreign oil problem. And now
> with the answer staring them in the face there is nothing from them.
>
> Nat Gas is THE answer for transportation. If utilized it would depress
> the price of oil and those Mid East potentates could go back to their
> former profession of herding goats.
GET TO KNOW AND SUPPORT SENATE 1408[SEN REID] AND HR 1835[REP BOREN].
ACT! DON'T GRIPE!
Most p/u's are perfect for conversion. This is a resource we have. And while LNG terminals are a terrorist's dream, to think of the terror imposed by gov't hostile to us, especially in an emergency...is an exceedingly dire threat to me.
Why we aren't exploiting this more is beyond me. But then again, the prospect of 11% unemployment hitting my generation was an astounding thought even a year ago.
-osgo
!. Only allow 4 and 6 cylinder cars to be sold in The United States . Period. No arguements. Just do it
2. Give people who purchase a vehicle that gets 30/40 miles per gallon a tax write off and you will see manufactures building those cars Immediately. Increase it to 50 miles per gallon and somehow the manufactures will come up with such a vehcle, that we even like. It is called Reward the Invention not the Study
www.ibtimes.com/articl...
while you are at it, why not only allow baked potatoes and outlaw french fries. don't allow red meat, only allow chicken. don't allow blue pants, only allow red pants.
Your idea of letting gov't TELL us what we can and can't purchase is truly astounding. Do you really want the nanny state telling you how to wipe your rear end???
On Jul 09 11:22 AM mouth wrote:
> The cost of converting to Natural gas is expensive. The cost of giving
> money to Detroit to build alternative fuel cars is expensive. Two
> easy, easy answers to oil issue
> !. Only allow 4 and 6 cylinder cars to be sold in The United States
> . Period. No arguements. Just do it
> 2. Give people who purchase a vehicle that gets 30/40 miles per gallon
> a tax write off and you will see manufactures building those cars
> Immediately. Increase it to 50 miles per gallon and somehow the manufactures
> will come up with such a vehcle, that we even like. It is called
> Reward the Invention not the Study
ANY ONE KNOW THE ROUTE THIS PIPE WILL TAKE?
www.rubypipeline.com/d...
On Jul 09 12:32 PM jimmy46 wrote:
> A new pipeline, called RUBY, is already being planned to take Rockies
> gas to California """""
>
> ANY ONE KNOW THE ROUTE THIS PIPE WILL TAKE?
SENATE 1408 and HR 1835.
BILATERAL ACTION. get with it.
On Jul 09 11:01 AM Jimbo wrote:
> Prariedog555: I had NO illusions about that crew you helped elect.
> Energy Secretary Chu has dissed Natural Gas. I think the Obama folks
> expect a Disney Fairy to spread pixie dust all over the land and
> this will generate carbon-free electricity immediately.
They are now called FREEDOM fries. Get with the program..:)
On Jul 09 12:12 PM Mmarrkk wrote:
> mouth:
>
> while you are at it, why not only allow baked potatoes and outlaw
> french fries. don't allow red meat, only allow chicken. don't allow
> blue pants, only allow red pants.
>
>
Rig count +11, if I recall correctly. Injection lower. But that could be because of the operational order issued in Colorado that eliminates all injections from suppliers with interruptable contracts.
Further, any provider with an interruptable contract must withdraw all NG from that storage location by July 31.
HardToLove
On Jul 09 07:30 AM basehitz wrote:
> <We could see US$2 gas (per mcf). It’s definitely possible. We haven’t
> seen the production declines down here yet.>
>
> At the risk of missing the trade, I'm waiting for what would be an
> impressive final shake-out. I assume there is an limit to how much
> we can store underground. (Can anyone confirm/quantify that?) Assuming
> that is correct, given trajectory of storage, it would seem possible
> we hit that before getting to the fall extraction period. Then NG
> price would collapse. I would buy that.
tonto.eia.doe.gov/dnav...
HardToLove
On Jul 10 08:51 AM H. T. Love wrote:
> tonto.eia.doe.gov/dnav...
>
> Rig count +11, if I recall correctly. Injection lower. But that could
> be because of the operational order issued in Colorado that eliminates
> all injections from suppliers with interruptable contracts.
>
> Further, any provider with an interruptable contract must withdraw
> all NG from that storage location by July 31.
>
> HardToLove
>
> On Jul 09 07:30 AM basehitz wrote:
I will buy aggressively at $2.75 if it gets there - if not, I will pass and miss the upside, as well as gut-wrenching volatility in which I have little interest.
I think we will be under $4 in NG for at least a year, if not longer. There is just way too much gas right now, and unless we get the pickup in both power consumption and industrial, it won't get bid up much. REX just brings more gas into the high-consumption zone, and the winter spikes we used to see will never happen again unless a pipeline is out, or it is extremely cold for an extended period in the Midwest and Northeast. Not likely, IMO.
Supply and demand - very simple.
I also agree with numerous other posters and pundits - we should be building CNG buses and delivery vans like crazy, and mandate that fleets in metro areas be at least 50% CNG powered within five years.
Hell, the govt can take over abandoned auto plants in the Midwest and create 5,000 jobs building these suckers - that makes a lot more sense than pumping money into the financial rackets, er, I mean, institutions,
> I assume there is an limit to how much
> we can store underground. (Can anyone confirm/quantify that?)
About 8 bcf
On Jul 09 09:07 AM fran wrote:
> see this week's senate proposed legislation offered by sen reid--re
> NG for tansportation incentives. tax incentives to buy NG vehicle,
> build outlet stations, etc. it's almost all you call for in your
> complaint.
> get on board andwrite your congressional reps.
> act out your frustration.
> scurry, PRARIEDOG555, they've heard you in DC.
Cost <$1,000 (less than $200 for a pickup and DYI).
Needs approval of EPA. Even though the EPA says natural gas emits 93% less toxic emissions than comparable use of gasoline. No individual can afford to get his conversion certified. No idea how these folks do it now but, assuming the conversions are technically illegal, if the nation switched en-mass there would be dangerous cars all over the place with no inspection capability available in most states. Won't happen.
The car companies will have to do it and that's where any incentives have to go. Cost would be a small premium over gasoline (assumes NG only).
Distribution needs to be in place before cars are mass produced. Distribution capacity takes time and will be virtually dormant until cars are in the mass market. Car companies can turn on capacity much quicker but will have to wait for distribution. At home filling? How many of us want half our neighbors filling up compressed NG in their garage?
Makes a lot of sense but bill 1408 is a product of zero knowledge on the part of another of our brain trusts in Congress.
On Jul 09 07:30 AM basehitz wrote:
> <We could see US$2 gas (per mcf). It’s definitely possible. We haven’t
> seen the production declines down here yet.>
>
> At the risk of missing the trade, I'm waiting for what would be an
> impressive final shake-out. I assume there is an limit to how much
> we can store underground. (Can anyone confirm/quantify that?) Assuming
> that is correct, given trajectory of storage, it would seem possible
> we hit that before getting to the fall extraction period. Then NG
> price would collapse. I would buy that.
total working gas in the US is about 4 tcf, maybe 4.2 with line pack.
On Jul 10 11:16 PM Alan von Altendorf wrote:
> Ooops. Make that 8,000 bcf system-wide
> you may want to check your storage numbers.
> total working gas in the US is about 4 tcf, maybe 4.2 with line pack.
8 tfc total storage annually
tonto.eia.doe.gov/dnav...