As soon as the natural gas market starts to make sense, more craziness occurs in the pipeline side of the market. Early this year TransCanada Pipelines (TCPL) completed transportation contracts of over 100 years in length.
Earlier this year I wrote about the way natural gas transportation is allocated across Canada, <<TransCanada Rules>>. The recent long-term transportation contracts show one result of the new process. Direct contracts with TCPL are regulated by the National Energy Board, so the only differentiator in the bidding process is term. Where natural gas shippers could in the past contract for one year at a time, now shippers need to include a 100 year term with their bid to acquire necessary transportation.
In the secondary market the cap is off and transportation rates are rising.
Producers are doing all they can to get their gas supply production out of Alberta to avoid the low commodity price at Aeco. With continuing constraints at Empress, Alberta, shippers currently place a very high value on having firm transportation to Ontario and Quebec.
The length of the transportation contracts also shows the sentiment in the market on the likelihood (or unlikelihood) that LNG ports will appear on Canada’s west coast.
TCPL has committed to expanding transportation infrastructure to alleviate some of the choke points but pipelines need planning, approvals and time to build. <<Changing Dynamics >>
Aeco, Alberta prices have improved somewhat but are expected to stay low this summer. All other delivery points (Empress, Dawn, etc) are close to where they should be in comparison to traditional supply and demand.
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