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Analysis: Alliance Pipeline's force majeure drops natural gas imports to US on line to zero

Highlights

Minimal effects so far on prices

Outage to last through June 21

  • Author
  • Brandon Evans    Richard Frey
  • Editor
  • Richard Rubin
  • Commodity
  • Natural Gas

Denver — A force majeure on Alliance Pipeline looks to slice Canadian exports to the US on the line over the next few days to zero from 1.7 Bcf/d, but S&P Global Platts Analytics does not expect the outage to have much of an effect on Canadian or Midwest prices.

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Alliance will undergo a total shutdown from Tuesday through Friday. Alliance announced the force majeure just before midnight Monday. The shutdown has brought all receipts and deliveries to and from the pipe to zero, including imports at the US-Canada border, which averaged 1.7 Bcf/d during the 30 days prior.

The 2,400-mile pipeline transports gas from Western Canada and the Williston Basin to the Chicago market hub.

From a Midwest perspective, the impact appears minimal so far. Natural Gas Pipeline Company of America Nicor prices for gas day 19 were flat to gas day 18's cash price of $2.20/MMBtu.

The biggest receivers of Alliance gas are ANR and Vector pipelines, which each took 640 MMcf/d and 365 MMcf/d from Alliance the past 30 days, but saw Alliance supply drop to zero for gas day 18. This may explain why ANR is sending less gas into Michigan through its St. John Eastbound constraint, and why ANR's storage fields in Michigan injected just 950 MMcf/d on gas day 18, or about 450 MMcf/d less than the prior two-week average, according to Platts Analytics.

Despite less supply into Michigan, MichCon prices are actually down several cents day over day in trading for gas day 19. Vector is compensating for the loss of Alliance supply by sending less gas into Eastern Canada.

The Canadian impact will be more difficult to discern until Thursday, but even then, any fallout should be minimal. Canadian data is on a one-day lag, so any shifting supply routes remain known. However, in the past, Alliance shutdowns have not resulted in more gas moving to the Nova Gas Transmission or Westcoast pipeline systems, suggesting there is little optionality for producers, and AECO and Westcoast Station 2 prices should be isolated from this event.

Dawn gas day 19 prices are not available as of publishing, but demand is expected to be flat to declining over the next few days and Dawn inventories are well within historical norms, suggesting Dawn should not see substantial price impacts from the force majeure.

-- Brandon Evans, bevans@spglobal.com

-- Richard Frey, richard.frey@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com