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New England pivoting from Canadian gas

14 Oct 2016 20:53 (+01:00 GMT)
New England pivoting from Canadian gas

Houston, 14 October (Argus) — Algonquin Gas Transmission is likely to source its natural gas supply from the Marcellus shale for the rest of the month as electric demand falls to a level that makes Canadian gas imports uneconomical.

At times of high electricity demand or constraints on flows from Appalachia, Algonquin can source additional gas from Iroquois Gas Transmission, the Maritimes & Northeast pipeline and the Deep Panuke production platform, offshore of Nova Scotia. Maintenance on Algonquin's Stony Point, New York, compressor station from April through the end of this month has limited supplies from Marcellus, boosting Canadian imports onto the line.

Spot natural gas prices at Algonquin Citygates have averaged $2.68/mmBtu during the maintenance period, up by 12pc from the same time frame last year.

Peak power load of around 18GW for regional grid operator ISO New England pushes gas demand high enough to drive Canadian imports onto Algonquin above 400mn cf/d (11mn m³/d), analysis and consulting firm Energy GPS said. For the majority of September, peak demand was at 18GW or higher as temperatures across New England drove strong cooling demand. But in the final week of that month temperatures began to moderate toward seasonal norms, shifting peak demand below 16GW, the firm said. Demand is forecast to remain at or near that level for the remainder of October.

As a result, Canadian imports through the Iroquois pipeline fell to zero and Algonquin Citygates fell below Henry Hub in the final week of September, the firm said.

"We have seen pretty consistent Canadian imports from Maritimes and Iroquois," onto Algonquin over the past year, BTU Analytics senior energy analyst Matthew Hoza said. "This past year we have seen more volatility because there are now more sources of supply competing for the same market."

One source of supply is the Deep Panuke production platform, which had moved to a seasonal operation last year, shutting for the summer months when demand was low. But the platform has remained in steady operation for most of the past 12 months, shutting only for the month of April.

The platform produced between 190mn cf and 2.5 Bcf per month in May through August, according to the most recent data from the Canada-Nova Scotia Offshore Petroleum Board.

"Deep Panuke typically only runs in times of high demand, so it would not be a stretch to say it has been on line more this summer to make up for any lost volumes previously sourced from the Marcellus" because of the Stony Point maintenance, Hoza said.

Prices at a few key Appalachian hubs fell to multi-year lows as temperatures in the region moderated. Tennessee Gas pipeline zone 4 Marcellus sank to 41¢/mmBtu on 30 September, a three-year low. And that day Dominion South plummeted to 32¢/mmBtu, its lowest value since Argus began publishing the index in September 2008. The two indexes have since recovered slightly but have both remained below $1/mmBtu so far in October.

"We think the near-term outlook for northeast gas prices has quickly turned sour" amid high storage levels and mild weather, Morgan Stanley said last week. Well-above-normal eastern US temperatures last month caused northeast residential and commercial demand to fall by 400mn cf/d from a year earlier, the commodity research firm noted.