Transcan resumes talks with shippers
TransCanada Corp. is back in negotiations with natural gas producers to ship more western Canadian gas to Ontario and thwart plans for a competing pipeline from Pennsylvania approved by the U.S. government last week.
The company confirmed Wednesday it is in discussions with Calgary- based producers to lower tolls on its existing mainline system in an attempt to protect its market share in Ontario, which has been threatened in recent years by supplies from the U. S. Marcellus and Utica gas formations.
“We have resumed discussions to find a l ongterm fixed- price proposal for the Canadian Mainline, and until an agreement is reached, we are not in a position to provide more details,” TransCanada spokesperson Shawn Howard said in an email.
TransCanada had previously offered reduced tolls on its natural gas main line between Empress, Alta. and Dawn, Ont. last fall to encourage more Canadian gas producers to ship their product East but, despite support from major industry associations, failed to secure enough volume commitments.
“We are always interested in what our shippers have to say and we indicated that if they came back to us with other proposals, we would listen to what they bring forward,” Howard said.
Ed Kallio, a natural gas analyst with the Eau Claire Energy Advisory, said it’s i ncreasingly urgent that TransCanada comes to an agreement with its shippers following last week’s U. S. approval of the competing Rover pipeline.
Last week, the U. S. Federal Energy Regulatory Commission approved Dallas- based Energy Transfer Partners L. P.’s Rover pipeline, which would carry gas from the U. S. to the Dawn pricing hub in Ontario. The company announced it expects the line, which has a capacity of 3.25 billion cubic feet per day, to be fully operational by November.
“As soon as you’ve got incremental pipe out of Appalachia into that region ( Ontario), it’s another nail in the coffin, and a big nail in the coffin,” Kallio said of TransCanada’s main- l i ne system, which he said shippers have l eft in recent years.
Andy Mah, president and CEO of Calgary- based Advantage Oil and Gas Ltd., said natural gas from Western Canada is cost- competitive relative to production from any other formation in North America. “The transportation component, if that’s competitive, then we can compete head- to- head,” Mah said.
Mah said conversations with TransCanada have involved a wide range of natural gas producers, are ongoing and could be resolved soon. “I would think that we’re probably, in short order, going to see something hopefully positive,” he said.
“I think there’s enough incentive for both parties to keep the conversation going and hopefully reach a suitable arrangement here,” he said.
Kallio said it’s “imperative” that western Canadian gas producers maintain their market share in Ontario, especially given that no l i quefied natural gas ( LNG) projects have yet been built on Canada’s West Coast to establish new markets for the commodity.
Last fall, TransCanada offered to cut its tolls on t he main l i ne, where it has spare capacity, by 40 per cent to 82 cents per gi gajoule if it r eceived enough volume commitments from gas producers, which it did not.
“Now they are faced with going back and doing what they should have done in the first place,” Kallio said, which is offer even lower tolls to attract more shippers.
While Rover is scheduled to be fully in service by November, Kallio said TransCanada still has an advantage by having pipes in the ground now and could have new tolls in place before the competing pipeline is operational.