Ruby's price impact on West Coast markets under debate ahead of summer in-service

Monday, February 14, 2011

When El Paso's twice-delayed Ruby Pipeline comes online in June, it will bring 1.3 Bcf/d of new capacity into northern California. But analysts are divided on the impact that new gas will have on prices at either end of the line.

The pipeline, originally scheduled for a March start-up, will stretch 680 miles from the Opal Hub in Wyoming to Malin, Oregon. According to analysts from Platts unit Bentek Energy, predictions of price weakness extending beyond Malin to the Pacific Gas and Electric city-gate are unlikely to come true, partly because it will be largely existing Rockies gas, not new production, that will enter the California market.

"A lot of those initial volumes are gas that's currently flowing into the West" from Northwest Pipeline or TransColorado Gas Transmission, going into Transwestern Pipeline and El Paso Natural Gas or into Northwest at Stanfield, Oregon, Bentek analyst Rocco Canonica explained.

Roughly 1 Bcf/d of supply currently makes its way into the PG&E market from the Rockies through those routes, and most of that gas will likely find its way into Ruby due to its considerably lower transportation costs, which Bentek estimated at 22 cents/MMBtu, versus 36 cents/MMBtu from the Rockies and 39 cents/MMBtu from Alberta.

That would leave around 300,000 Mcf/d of extra Rockies gas to be added to the West Coast. Because it will now be aimed directly at Malin, it would probably pressure Malin spot and forward prices, Canonica said. However, because "you're not increasing capacity or supply into PG&E, there shouldn't be any downward effect on price there."

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