Aegent has noted that gas buyers should pay attention to Dawn price risk because of the changing supply/demand balance at Dawn and the increasing demand for gas at Dawn. To match this growing demand more supply needs to be transported to Dawn so that the supply/demand balance can be restored.
A number of pipeline projects are being proposed to transport Marcellus and Utica shale gas to Dawn and Niagara. These include the NEXUS Pipeline Project, the ET Rover Pipeline, the ANR East Project, and expansion of the Tennessee Gas Pipeline system to bring incremental supply to Niagara.
Nexus Pipeline Project
The proposed NEXUS pipeline will consist of 250 miles of large diameter pipe that is capable of transporting 1.5 billion cubic feet per day (Bcf/d) of natural gas from northeastern Ohio to an interconnect with the existing DTE Energy facilities at Willow Run in southeastern Michigan. The project will then utilize existing and expansion capacity on the DTE Gas Transmission and Vector Pipeline systems to deliver gas to the Union Gas system at Dawn, Ontario. The in-service date is currently set for November 1, 2017. Both Enbridge Gas Distribution and Union Gas have entered into Precedent Agreements with NEXUS.
ET (Energy Transfer) Rover Pipeline
The ET Rover Pipeline is designed to transport 3.25 Bcf/d of natural gas through approximately 720 miles of pipeline ranging between 24’’and 42’’ in diameter. The $3.7 billion pipeline will gather gas from processing plants in eastern Ohio, West Virginia and western Pennsylvania and deliver it to a market hub near Defiance, Ohio. Sixty-eight percent of the gas will be distributed to the US market while the remaining 32% will serve the Michigan market via Vector Pipeline and any excess gas will be delivered to the Union Gas system at Dawn. The facilities are expected to be in-service by mid-2017.
ANR East Project
ANR has proposed the construction of a large diameter, high pressure pipeline to connect Marcellus and Utica gas to its existing system at Defiance, Ohio. Based on customer interest, ANR could transport gas to Dawn via Great Lakes Gas Transmission and TransCanada PipeLines. The targeted in-service date is sometime during the third quarter of 2017 with some portions being phased in earlier, depending on regulatory approvals.
Tennessee Gas Pipeline – Niagara Expansion Project
Tennessee Gas Pipeline is proposing an expansion of its existing pipeline system to transport 158,000 MMBtu/d of natural gas from Pennsylvania supply sources to their interconnect with TransCanada PipeLines at Niagara. The $27.5 million project will include 3.1 miles of pipeline looping plus modifications to compressor station piping and metering. The project received Federal Energy Regulatory Commission approval in February 2015. Subject to other regulatory approvals, conditions and oversight, the anticipated in-service date is November 2015.
Completion of one or all of these projects would certainly go a long way in ensuring incremental supply can reach Dawn and Niagara to meet the increasing demand for gas at Dawn and reduce the potential price risk associated with sourcing gas at Dawn and Niagara. Importantly, the major new projects are not expected to be in-service until the winter of 2017-18, whereas demand continues to shift to Dawn in 2015 and 2016.
Pay attention to Dawn price risk Read more »
Hedging: A Tool for Risk Reduction, Not Cost Reduction Read more »