Marcellus seen upending Canada, Midwest flows

(Platts Gas Daily - November 20, 2013) Marcellus seen upending Canada, Midwest flows

Surging production from the Marcellus Shale could eventually serve most of Ontario’s and Quebec’s gas needs and displace gas currently flowing to eastern Canada from Chicago and points west, the CEO of the Canadian Energy Research Institute said Tuesday.

That dynamic could mean trouble for several pipelines that move gas into what would become an oversupplied Midwest market, including Northern Border Pipeline and Alliance Pipeline, Peter Howard told the LDC Gas Forum in Toronto.

As a result, those systems might experience issues similar to TransCanada’s Mainline, which changed its rate structure in light of plummeting throughput, angering shippers and leading to years of negotiations.

The Marcellus continues to experience “phenomenal growth” and will produce between 17 and 22 Bcf/d by 2030, Howard said, noting that the impact is already being felt across the Northeast. For example, Iroquois Gas Transmission, which moves Canadian gas from the US-Canada border at Waddington, New York, through New York state and western Connecticut, is “deteriorating” and will likely reverse its flow in the coming years, sending Marcellus gas into Ontario.

Howard said Alliance — which carries gas from the Western Canadian Sedimentary Basin and the Williston Basin to the Chicago hub — has a better chance of surviving the Marcellus onslaught because of its ability to also carry natural gas liquids. Howard said Ohio’s Utica Shale could end up feeding Canadian demand as well. He noted that parts of the Utica are near Sarnia, Ontario, a hub for the petrochemical industry, and “if it actually starts to develop, [that gas] is going into Ontario.”

On a separate panel at the conference, Rick Smead, managing director of advisory services at RBN Energy, said the Northeast gas market will become self-sufficient by about 2016, which has “huge implications” for the broader North American market. Smead said flows on TransCanada’s Mainline have dropped more than 2 Bcf/d since 2005 and flows on Great Lakes Gas Transmission into the Dawn, Ontario, hub have plummeted from 1.5 Bcf/d in 2005 to nearly zero today.