Page 5 - NorthAmOil Week 30

NorthAmOil COMMENTARY NorthAmOil NATURAL GAS
Sable project was permanently shut down at the start of this year a er declining for some time. According to Volpé, Enbridge’s contract repre- sents about half the company’s requirements.
Under TC Energy’s plan, the gas will travel via its six-line Mainline as far as Quebec, then cross the border into the New England region of the US in other pipelines before crossing back into New Brunswick.
TC Energy already ships some gas to East- ern Canada under short-term spot sales, but the approval of its new plan will lock in more vol- umes over the longer term.
New options
TC Energy has been forced to come up with new options for its gas in response to changing market dynamics that have arisen as a result of the North American shale gas boom. Eastern Canadian distributors have been buying shale gas from the US Northeast. ese volumes are closer, making them cheaper to ship to Eastern Canada, and the abundance of supply has also driven down prices.
Consequently, TC Energy’s Mainline has been losing money because it has been operat- ing below its full capacity for natural gas. Indeed, that was one of the reasons the company had wanted to convert part of the system to crude service for Energy East previously.
“ is fundamental change in North Amer- ican natural gas markets requires innovative market solutions, such as long-term xed price service offerings,” the NEB said in its ruling approving the contracts. And TC Energy was able to come up with such a solution, by o ering bidders what Volpé described as “a signi cant discount” on the shipping toll they will pay to bring the gas from Alberta to New Brunswick. e latest toll cut on TC Energy’s Mainline, with
tra c on the system due to grow incrementally from November 1 this year, is the company’s third. While there may be concerns about how this toll cut a ects pro ts, it nonetheless makes Western Canadian gas competitive with sup- plies from the US Northeast. e increase in gas on the Mainline is expected to result in about CAD250 million ($189mn) in compressor addi- tions on the system.
Enbridge’s 20.5-year contract for the gas starts in 2021, though Volpé told CBC that another contract for gas from an Ontario distribution hub was starting in 2020, and was expected to result in lower rates from next year. Irving Oil’s 20-year contract with TC Energy starts on November 1. In its lings with the NEB, Irving called the plan “extremely important ... in meet- ing its needs for secure and reliable natural gas supplies for its operations in Atlantic Canada”.
According to TC Energy’s filings with the NEB, 17 companies in Ontario, Quebec, Atlan- tic Canada and the US Northeast have signed contracts for Western Canadian gas covering periods between 10 and 20.5 years.
e plan provides an outlet for more West- ern Canadian gas, with gas pipelines once again making more headway than their crude oil counterparts. However, with unused capacity on the Mainline being lled up, this makes a revival of Energy East even less likely, given that there would be no spare capacity available for crude conversion given the length of some of the con- tracts with shippers. Building new oil pipelines is proving even more di cult than converting existing ones to crude service. Current market conditions do not suggest that Energy East is likely to be needed anytime soon, but TC Ener- gy’s shi in focus to gas reaching Eastern Can- ada appears to be putting another nail into the oil pipeline’s co n.™
The buyers of TC Energy’s gas are optimistic that the plan will result in considerable savings.
Week 30 01•August•2019 w w w . N E W S B A S E . c o m
P5
Canadian Mainline
0 200 400 800 Kilometers
0 130 260 520 Miles
TERMS OF USE: The datasets used to create this map have been gathered from various sources for a specific purpose. TransCanada Corp. provides no warranty regarding the accuracy or completeness of the datasets. Unauthorized or improper use of this map, including supporting datasets is strictly prohibited. TransCanada Corp. accepts no liability whatsoever related to any loss or damages resulting from proper, improper, authorized or unauthorized use of this map and associated datasets and user expressly waives all claims relating to or arising out of use of or reliance on this map.
Date: 3/28/2017
Document Name: T_0020_059_D_CanadianMainline.mxd
Legend
Canadian Mainline
Existing TransCanada Pipeline
© OpenStreetMap (and) contributors, CC-BY-SA