Out of the Woods - Pacific Northwest Gas Supply Route Returns Full Force

After more than a year of reduced natural gas flows, inspections and integrity checks, Enbridge's Westcoast Energy/BC Pipeline system in British Columbia returned its T-South segment to normal operating pressure, effective December 1, ending 13 months of restricted exports of Western Canadian gas supplies to the U.S. Pacific Northwest gas market. The outage and the resulting reduction in export flows out of Western Canada had prolonged effects on local and downstream gas flows and prices, including a run-up in prices at the Sumas, WA, border crossing point to an all-time U.S. record high of $200/MMBtu last winter. Today, we provide an update on Westcoast flows and their downstream impacts.

As we discussed in Baby I Need Your (Gas) and Let The Sky Fall, the Pacific Northwest region has been forced to contend with significant pricing volatility over the past 13 months. Enbridge declared a force majeure on October 9, 2018, when a section of its 36-inch-diameter Westcoast pipeline ruptured near Prince George, BC. The pipeline initially halted service on the southern portion of the 2.9-Bcf/d system, also known as the BC Pipeline, comprising the affected 36-inch line as well as a parallel 30-inch line. Both lines returned to service in October 2018, but at a reduced operating pressure pending integrity testing and regulatory approval. In the wake of the rupture, a team of Canada Energy Regulator (CER) pipeline integrity specialists and engineers were tasked with analyzing and verifying data to show that each of the affected pipeline segments (12 in total) were safe to return to full operating pressure.

The BC Pipeline system is a critical outlet for gas out of Alberta and British Columbia and one of just a few pipelines serving the Pacific Northwest region. Western Canadian gas supply flows via the BC system to a 1.3-Bcf/d interconnect at the Huntington/Sumas border-crossing point. From there, the gas is delivered into Williams’s Northwest Pipeline (NWPL), which then flows to local distribution companies, gas-fired power generation plants and gas storage facilities, as well as to petroleum refineries, primarily in Washington state but also some in Oregon and Idaho. With flows restricted by lower operating pressures, natural gas volumes experienced a bottleneck effect north of the U.S.-Canadian border, causing spot prices at BC’s Westcoast Station 2 hub to plummet to as low as negative $1.205 in Canadian dollars per gigajoule (C$/GJ) on November 7, 2018 (dashed gray oval to left in Figure 1’s right graph), marking the lowest price ever recorded by NGI at that hub.

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