Houston — More natural gas looks likely to flood the US Upper Midwest this winter due to an increase in contracted exports from Canada and output from North Dakota's Bakken Shale.
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Index of Customer data along with expectations from the Bakken suggest net exports to the US Midwest should increase about 100 MMcf/d this winter compared with last.
Western Canada exported 4 Bcf/d to the US Midwest in the winter of 2018-2019, according to S&P Global Platts Analytics.
Contracts indicate exports on Great Lakes Gas Transmission, Viking Gas Transmission and Alliance Pipeline could collectively increase 275 MMcf/d winter over winter. However, growth expectations from the Bakken suggest this could be partially offset by an extra 150 MMcf/d of North Dakota supply flowing onto Northern Border Pipeline at the expense of Western Canadian supply.
Great Lakes' third quarter of 2018 IOC data indicates the pipeline had 891 MMcf/d worth of contracts to take gas from Emerson into the Midwest last winter. The pipeline exceeded that level over the winter and averaged 1 Bcf/d of imports. This coming winter, there are 1.072 Bcf/d in contracts to import gas at Emerson, for a winter-over-winter increase of about 180 MMcf/d, suggesting exports to the pipeline could increase year on year.
Viking's Q3 2018 IOC data shows the pipeline had 281 MMcf/d contracted from Western Canada at Emerson last winter, and the pipeline flowed just more than this at 288 MMcf/d. Viking has 67 MMcf/d more contracted at Emerson this winter, for a total of 347 MMcf/d, suggesting imports could increase on this line as well.
Alliance's Q3 2018 IOC data shows the pipeline had 1.3 Bcf/d of contracts to take supply from Western Canada at its Border US point into the Midwest. Actual flows exceed this contracted amount by 230 MMcf/d for an average of 1.53 Bcf/d last winter. This winter, there is 1.325 Bcf/d contracted for shipment from Canada, suggesting a small increase may be likely.
NORTHERN BORDER OPTION
Shippers on Northern Border have the ability to switch their receipt point between either the US-Canada border or a receipt point in the Bakken in North Dakota. Associated Bakken gas production has essentially no other outlet outside of Northern Border.
With flaring at its limit and more processing coming online this winter, Platts Analytics expects Bakken production will rise and force its way onto Northern Border at the expense of imports from Western Canada this winter.
Platts Analytics is forecasting a 150 MMcf/d winter-over-winter production increase from the Bakken, which is expected to drive near one-for-one displacement of AECO exports to Northern Border.
Assuming an increase in the contracted amount leads to one-for-one increased exports to the Midwest, exports should rise by 274 MMcf/d collectively on Great Lakes, Viking and Alliance. After accounting for 150 MMcf/d of production gains from the Bakken and lost market share for AECO on Northern Border, the US Midwest would take an incremental 124 MMcf/d from Western Canada this winter.
Despite the additional contract volumes, Platts Analytics is not forecasting an increase in exports to the Midwest. Weak drilling activity and rising demand in Western Canada is expected to lead to a tighter AECO market this winter compared with last, and exports to the Midwest may decrease as a result.
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