Ruby Pipeline extends force majeure as Opal prices fall further

Ruby Pipeline extended through the end of the month its force majeure on a compressor station, limiting westbound flows by nearly 1 Bcf/d, as the Kern River Gas Transmission, Opal cash price falls further.

Repair work on the Segment 20 Roberson Creek Compressor Station is not expected to be completed before July 31. Ruby initially announced a force majeure July 8 because of a mechanical failure, but the Roberson Creek compressor station was listed in July's preliminary maintenance schedule, which was published in mid-June.

"[Ruby] has investigated the mechanical issues associated with two units at its Roberson Creek Compressor Station and identified a failure of the couplings located between the electric motor and the step-up gear box," the company announced July 13. "The repairs, including the securing of replacement parts and the return to service of the units, are not anticipated prior to July 31, 2021. Ruby continues to explore ways to increase system throughput until Roberson Creek Compressor Station is brought back fully into service."

Capacity at Roberson Creek will remain at 550 MMcf/d for the rest of this month, which is nearly 1 Bcf/d below the total operationally available capacity of 1.489 Bcf/d. Kern River-Opal cash price was $3.72/MMBtu July 8. It was down to $3.39/MMBtu by July 14.

Ruby was already underutilized before the force majeure was issued. Westbound flows on the pipeline, which stretches from Opal, Wyoming, to Malin, Oregon, averaged 654 MMcf/d in June, according to S&P Global Platts Analytics data. It averaged 730 MMcf/d in May. It has only averaged 512 MMcf/d so far in July, meaning the amount of redirected westbound gas has likely been closer to 100/MMcf/d-200 MMcf/d.

Competition from Canadian gas prices is one factor leading to lower Ruby utilization as the US Pacific Northwest takes greater year-on-year imports. Total Canadian exports are up 830 MMcf/d, with flows to the Pacific Northwest driving most of this with a 470 MMcf/d summer-on-summer increase, according to Platts Analytics. The US Pacific Northwest has been plagued with record-setting heat this summer combined with below-normal hydroelectric output because of low snowpack levels.

Ruby's non-PG&E contracts expire in mid-2021, which was one of the reasons Moody's cited when it downgraded Ruby in March.

"The downgrade and negative rating outlook reflect Ruby's high refinancing risk amid cash flow uncertainty and weak liquidity as its senior notes mature in 2022," said Amol Joshi, Moody's vice president and senior credit officer. "The company also faces high re-contracting risk in 2021 when its non-PG&E contracts mature, and the weak pricing and volume environment for such re-contracting."