The startup of maintenance on BC Pipeline has begun limiting gas imports from Canada to the US Pacific Northwest this week, with lower regional supply and higher prices likely to endure through late August.
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Register NowOn Sunday, pipeline operator Westcoast Energy began inspections and repairs on its T-South system, cutting capacity through Station 4B South near Prince George, BC, by nearly 600 MMcf/d.
The outage has lowered cross-border imports at Sumas to an average 590 MMcf/d since Sunday, equivalent to a 35%, or more-than-320 MMcf/d, cut, according to data from S&P Global Platts Analytics.
Following Westcoast's announcement Thursday of an early start to the five-week maintenance, spot gas prices at Sumas have surged. On Monday, cash basis at the border hub settled at a 15 cent/MMBtu discount to Henry Hub, up about 35 cents/MMBtu from the week prior.
Balance-of-month forward basis has also strengthened considerably. On Monday, the July contract settled at just a 1 cent/MMBtu discount to the benchmark, up nearly 30 since last week.
On Tuesday, the most recently published settlement data showed Sumas cash basis at minus-26 cents and the balmo basis contract at minus 20 cents/MMBtu. Wednesday's intraday cash and forwards data was not yet available from S&P Global Platts at the time of writing.
SUPPLY
The precipitous decline in imported Canadian supply at Sumas has seen gas transmission from the Rockies to the Pacific Northwest rise sharply this week.
Since Saturday, flows have averaged over 1 Bcf/d, up from an average 740 MMcf/d during the two weeks prior. Inflows from the Rockies last topped 1 Bcf/d in April, data compiled by Platts Analytics shows.
With the current maintenance schedule to continue until next month, the recent uptick in PNW gas prices and Rockies gas supply could be expected to endure until its completion date on August 21.
PRICE RISK
Supply restrictions on Westcoast Energy's T-South system and proportionate cuts at Sumas earlier this year and last have triggered severe price spikes in the Pacific Northwest gas market.
In early March, a capacity restriction at Station 4B South to just 1.18 Bcf/d occurred just as temperatures across the US Northwest plunged into the upper-30s F. The precipitous increase in gas demand, combined with supply restrictions from Canada and the Rockies drove prices at Sumas to record highs at over $178/MMBtu.
At the time, Northwest gas demand was peaking at winter highs around 2.9 Bcf/d, or about 1.2 Bcf/d above levels typically expected during the summer months.
During the hottest summer days, PNW demand has historically peaked at levels near 2 Bcf/d. Combined with inflow restrictions at the US-Canada border, gas demand near those levels could see cash prices at Sumas rise above the low-$2/MMBtu area currently expected in the forwards markets.
--J. Robinson, jrobinson@spglobal.com
--Jack Winters, jack.winters@spglobal.com
--Edited by Jared Anderson, newsdesk@spglobal.com