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Analysis: Rover Pipeline coming online results in higher flows into East Canada

Rover Pipeline's long-awaited Market Zone North segment startup is resulting in higher flows into Eastern Canada as well as increased storage injection activity there, while lower injection activity is now being seen in the US Midwest.

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Flows into the Dawn Hub in Ontario increased on June 1 when the segment was placed into service, which allows gas produced in the US Northeast region to access downstream markets at Dawn via leased capacity on Vector Pipeline.

This has driven exports from Michigan to Dawn on Vector to climb 400 MMcf/d from the May average, although the overall impact on the Midwest has, thus far, been spread out and somewhat muted, according to S&P Global Platts Analytics.

Since June 1, Rover has delivered an average of about 800 MMcf/d into Vector Pipeline, where Rover has 950 MMcf/d of leased capacity under long-term contract. On Vector, deliveries to Dawn since then have increased by about 450 MMcf/d to average 605 MMcf/d this month, up from an average 160 MMcf/d in the last week of May.



The mismatch between the increase in receipts from Rover and deliveries to Dawn on Vector is due to the fact that flows from several other supply sources on Vector have declined since June 1. Receipts on Vector from Alliance, Guardian and Northern Border pipelines have fallen by around 311 MMcf/d this month versus last, indicating US Northeast gas may already be crowding out some of the downstream markets traditionally served by Canadian gas, according to Platts Analytics.


DAWN INJECTIONS UP SINCE JUNE 1


At Dawn, the increase in supplies from Vector has been matched with stronger storage injections. Dawn injections averaged 726 MMcf/d over the first few days of June and reached as high as 900 MMcf/d June 2, up from 400 MMcf/d in May.

Most of this coming at the expense of Rover deliveries to ANR Pipeline, which have fallen 0.5 Bcf/d from May to average 740 MMcf/d since the start of June. Despite the steep drop in Rover receipts, ANR flows to the Southeast have remained constant at about 0.9 Bcf/d.

The bulk of the drop in ANR receipts from Rover in Ohio has been offset by more gas flowing south from Michigan through ANR's Defiance Southbound constraint, which is averaging 350 MMcf/d since June 1, which is up 220 MMcf/d from May's average, before Rover began delivering to Ontario.

Rockies Express Pipeline has also helped to make up the shortfall from Rover, and ANR receipts from the line are up 0.1 Bcf/d since June 1 from their may average. As Rover has redirected gas from ANR to Vector, this has led to the historical suppliers to Vector in Chicago needing to find a new home for their gas.


ALLIANCE DELIVERIES TO VECTOR ON TRACK FOR RECORD MONTHLY LOW


With Vector delivering 0.4 Bcf/d of Rover's 0.7 Bcf/d to Eastern Canada, the other 0.3 Bcf/d has displaced Vector supply from Alliance and Northern Border in the Chicago area, according to Platts Analytics. Alliance deliveries to Vector are averaging 250 MMcf/d this month-to-date, and while this is only a 130 MMcf/d drop from May, it is on pace for a new record monthly low.

Over the past five-Junes, Alliance has delivered an average of 0.8 Bcf/d to Vector near Chicago, and has never delivered less than 0.4 Bcf/d to Vector in any month dating back to at least 2005.

Northern Border Pipeline has also seen its deliveries to Vector drop 120 MMcf/d from May to 250 MMcf/d this June.

The latest approval by the US Federal Energy Regulatory Commission allowed for 100% of Rover's mainline capacity, 3.25 Bcf/d, to be placed into service last Friday. Energy Transfer has said the 713-mile, $4.2 billion pipeline, will deliver 68% of its gas to markets across the US while the remaining 32% is slated for delivery to markets in Michigan via an interconnect near Livingston County with Vector.

Additionally, Vector transports gas not delivered to Michigan markets on to the Dawn Hub in Ontario, the company confirmed.

--Brandon Evans, bevans@spglobal.com
--Richard Frey, richard.frey@spglobal.com
--Edited by Richard Rubin, newsdesk@spglobal.com