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Volatility continues despite AIM pipeline expansion, but shippers have options

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Volatility continues despite AIM pipeline expansion, but shippers have options

Spectra Energy Corp's Algonquin Incremental Market project has given natural gas shippers more flexibility for delivering natural gas into New England, but as some have expected, the project falls short of satisfying the region's appetite for heating energy during very cold weather.

Consisting of 37.6 miles of pipeline and 81,620 hp of additional compression, the project, also known as AIM, is designed to bring 342,000 Dth/d of additional natural gas capacity into the region. FERC allowed Spectra Energy's Algonquin Gas Transmission LLC to put in service a substantial part of the project in late October that would amount to roughly 245,000 Dth/d of incremental capacity, and the regulator in late November gave permission to place another key portion of the project into service.

The project enables more natural gas to be delivered onto Algonquin at interconnections with other pipelines in New York and New Jersey and to flow more directly to markets in New England.

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Since the start of the winter heating season through Dec. 18, flows of natural gas through Algonquin's Stony Point compressor station, just downstream of those interconnections, are up 39.9% year over year at 1.56 Bcf/d, while flows through the Burrillville compressor station further to the east are up 52.9% over the same period to 734,021 Dth/d.

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The additional capacity into the region has allowed deliveries to southern Connecticut through Algonquin's C system and E system laterals to grow even as G system flows to southeast Massachusetts and J system flows to the Boston area and northeast Massachusetts reach levels that were seen during the coldest part of last winter.

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With incremental supply unable to reach the easternmost points of Algonquin, cold weather still sends natural gas prices soaring. On Dec. 12 spot natural gas prices at Algon Gates reached an index of $10.500/MMBtu as temperatures in Boston that weekend hit 20 degrees F. On Dec. 15, Boston temperatures hit a low of 14 degrees, and the spot natural gas market reached an index of $12.260/MMBtu.

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With plenty of available supply coming out of the Marcellus, industry observers say projects like AIM are not enough to meet the region's growing appetite for natural gas. Some worry that spiking natural gas prices will drive industrial customers from the region, as they cannot compete with those areas with access to a cheaper fuel supply. Meanwhile, New England's grid operator says that without reliable natural gas supply, the region faces blackouts.

Another Spectra project to increase capacity on Algonquin, the Access Northeast project, is supposed to bring an additional 925,000 Dth/d of capacity to power generators in the region by the fourth quarter of 2018. But figuring out who will ultimately bear the cost of the additional capacity has delayed the project by an estimated nine to 12 months. ISO New England Inc. says the region may see the most stable energy market for years to come, as the capacity mix shifts increasingly toward natural gas-fired generation without significant pipeline infrastructure expansions.

For the time being, shippers have more flexibility with regard to how they move natural gas into New England. The expanded capacity through the Stony Point compressor station has enabled shippers to take a more direct, cheaper route into New England.

Shipping natural gas from Tennessee Gas Pipeline Co. Zone 4 in western Pennsylvania to Algonquin's interconnect with Tennessee at Mendon in Zone 6 is significantly more expensive than other pathways into New England.

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From Oct. 31 to Dec. 18, deliveries onto Algonquin west of Stony Point compressor station have increased substantially year over year, especially in the absence of colder weather, while deliveries onto Algonquin at Mendon have fallen over the same period.

Average daily deliveries from Tennessee to Algonquin at Mahwah are up 5.4% year over year to 899,328 Dth/d, while those from Millennium Pipeline Co. LLC to Algonquin are up 13.6% over the same period to 729,357 Dth/d. Deliveries from Columbia Gas at Hanover are 10.6% higher at an average 39,465 Dth/d. Meanwhile, deliveries from Tennessee Gas Pipeline to Algonquin at Mendon have declined 34.8% to 108,472 Dth/d.

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Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas and coal index prices, as well as forwards and futures, visit our energy commodities pages. To view operational statistics on interstate natural gas pipelines, go to our Pipeline Summary Page. To view natural gas operational flow data for receipt or delivery points, go to our Operational Capacity by Point Page. To view natural gas pipeline tariff data, view our Tariff Summary Page.