El Paso’s Ruby Pipeline received final authorization to begin service July 27, and is scheduled to receive a combined 64 MMcf/d of gas supply from its Colorado Interstate Gas (CIG) and Opal processing plant receipt points July 28. The pipeline will deliver 16 MMcf/d to its Malin interconnects with Pacific Gas & Electric’s (PG&E) Redwood Path and Gas Transmission Northwest pipeline (GTN).
The initial flow is less than 5% of capacity. Flows are expected to increase gradually, but questions remain as to what extent Ruby will gain market share at Malin in the near-term, given several important market developments, including: (1) regional gas-on-gas competition, (2) more profitable spreads currently from Alberta, Canada via GTN and (3) capacity constraints currently imposed on the entire PG&E system.
BENTEK’s Market Alert, Ruby Delivers to Malin; What’s Next?, analyzes the challenges Ruby Pipeline and producers will face in the coming months, especially as competition intensifies between Canadian and Rockies supply for the PG&E Citygate premium market.
BENTEK also points out:
- Canadian supply has historically held a more than 95% market share at Malin, but Ruby’s start will intensify competition between Canadian and Rockies supply for the PG&E Citygate premium market.
- PG&E’s system will operate at 86% capacity through 2011 due to mandated pressure testing, further increasing gas-on-gas competition for capacity at Malin.
- ?Net price spreads in both spot and forward markets favor Canadian supply; Rockies prices would need to decline $0.10 from current levels to displace Canadian gas at Malin.