Thursday, July 28, 2011
July 28, 2011
Ruby Pipeline will offer Rockies natural gas producers a direct route to the West's premium market, PG&E Citygate in Northern California, and is predicted to provide one of the most low-cost routes in the region.
EVERGREEN, CO (July 28, 2011) – BENTEK Energy has released a new Market Alert providing an analysis of El Paso’s Ruby Pipeline, which posted its first scheduled natural gas flows from the Opal Hub in Lincoln County, WY, to Malin, OR, to occur today, Thursday, July 28. BENTEK reports that Ruby is scheduled to receive a combined 64 MMcf/d of gas supply from its Colorado Interstate Gas (CIG) and Opal processing plant receipt points and is expected to deliver 16 MMcf/d to its Malin interconnects with Pacific Gas & Electric’s (PG&E) Redwood Path and Gas Transmission Northwest pipeline (GTN). This scheduled volume amounts to only 4.3% of the total 1.5 Bcf/d pipeline capacity. Flows are expected to increase gradually, but questions remain as to what extent Ruby will gain market share at Malin in the near-term, given several important market developments, including: (1) regional gas-on-gas competition, (2) more profitable spreads currently from Alberta, Canada via GTN and (3) capacity constraints currently imposed on the entire PG&E system.
Despite the lower competitive variable cost rates Ruby offers for flowing gas west out of the Rockies, net price spreads currently favor Canadian supply at Malin. Rockies prices would need to decline $0.10 from current levels to push back Canadian gas. Canadian producers historically have held more than 95% market share of the total supply received at Malin.
“Ruby supplies will intensify competition between Canadian and Rockies supply for the PG&E Citygate premium market area, which has been primarily supplied by Canadian gas,” said BENTEK Vice President E. Russell (Rusty) Braziel. “Depending on market conditions, this has the potential to significantly shake up natural gas markets in the West.”
Ruby deliveries into PG&E will also be challenged due to the ongoing California Public Utilities Commission (CPUC) capacity reduction mandate imposed on the pipeline’s system in the wake of the San Bruno explosion on September 9, 2010. PG&E has reduced capacity on PG&E’s Redwood and Baja Paths pending the completion of system-wide integrity testing. On the Redwood Path, where Ruby would deliver gas, capacity is currently capped at 1.8 Bcf/d through the end of December, compared to the normal capacity of 2.1 Bcf/d for this period. As a result, BENTEK predicts shippers eyeing the Malin market will encounter heightened competition for capacity onto the Redwood Path.
For more information about BENTEK’s Ruby Delivers to Malin; What’s Next? Market Alert and for more market insight, log on to www.bentekenergy.com or call 1-888-251-1264. To follow ongoing developments on this topic, please refer to BENTEK’s daily and weekly California/ Southwest Observer, Rockies Observer and Canadian Observer.