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JP Morgan markets Statoil’s Marcellus gas in Canada

8 Nov 2012, 4.38 pm GMT

Washington, 8 November (Argus) — JP Morgan has signed an agreement with Norwegian state-controlled energy company Statoil to market natural gas from the Marcellus shale in eastern Canada after recent pipeline expansions enabled export capacity from New York State into Ontario on 1 November.

JP Morgan will market up to 320mn cf/d (9mn m³) of Statoil's gas received at Niagara, New York, on the US-Canada border. That agreement is valid for 10 years, beginning 1 November, with another 120mn cf/d volume to be marketed in 2022-23.

Statoil, which has a Marcellus joint venture with Chesapeake Energy, has contracted for firm transportation capacity on US interstate pipelines to move its shale gas from Pennsylvania to consuming markets in eastern Canada and the northeast US.

The Norwegian upstream company's strategy for marketing its Marcellus shale supply is in part driven by skepticism about the proposed US LNG export terminals.

“You need to believe in [arbitrage] between the US markets and the other markets and you need to believe in that for some 20 or 30 years to justify investment” in US liquefaction capacity, Statoil chief financial officer Torgrim Reitan said recently.

Statoil's gas production began flowing into Canada on 1 November, after Ontario-based pipeline operator Union Gas completed a project turning a lateral extending between Kirkwall, Ontario, and Niagara into a bidirectional line.

A pair of expansions by National Fuel Gas Supply and Tennessee Gas pipelines (TGP) enabled gas exports to Canada through Niagara last month. Total export capacity at Niagara is 548mn cf/d at present and daily volumes averaged 258mn cf/d since 1 November, TGP records show.

Cash prices in the dry-gas Marcellus production zone in northeast Pennsylvania are the lowest in the east coast, Argus data show.

Marcellus gas at TGP's northeast Pennsylvania segment averaged $3.33/mmBtu in the month-ahead market for November delivery, at a 67¢/mmBtu discount to prices at Dawn, Ontario.

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