Natural Gas Intelligence
Marcellus Gas Balloon Tilts Market West

Friday, January 06, 2012

El Paso Corp.'s Ruby Pipeline and Kinder Morgan Energy Partners LP's (KMP) Rockies Express Pipeline (REX) have linked "western and Northeast markets in a way that they were not linked historically," according to Bentek Energy LLC. And with Kinder Morgan Inc.'s (KMI) pending acquisition of El Paso, the two pipelines are slated to be corporate cousins, at least for awhile.

Booming gas production in the Marcellus Shale has pushed what would be eastbound Rockies gas on REX back toward the West. "Since the beginning of November, Rockies Express pipeline deliveries have begun to show significant declines year-over-year as spreads to the East have collapsed," Bentek analysts said in a recent Market Alert.

Meanwhile, "...Ruby has lifted the Opal cash price and allowed Rockies shippers at Opal to swing to the best-priced market. While Ruby only increased westbound capacity, the resulting price strength at Opal has effectively tightened the spread to all its downstream demand markets, including the Northeast."

According to Bentek, more gas will remain in the West due to eastern supply growth and better price spreads going west. And that outlook is reflected in an assessment by U.S. Capital Advisors of the pending KMI-El Paso pairing (see Daily GPI, Oct. 18, 2011), including what divestitures might be necessary to satisfy regulators at the Federal Trade Commission.

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