RE:RE:RE:RE:RE:RE:RE:Economics of WCSB vs Marcellus shipments to Eastern Canada?i believe you have the economics backwards. in terms of Eastern Canada, the marcellus/utica has the LOWEST cost supply. lets say producing and lifting the gas is about equal. it's probably cheaper in USA. but les say it is equal. then how could WCSB be more attractive given how much furuther they are to the end markets?in order for your idea of filling the mainline to capacity be true, TCPL would have to drop tolls SUBSTANTIALLY, and kill their profits. They reluctantly dropped tolls as far as they could and that makes WCSB barely competitive at DAWN.
the lowest cost supply to Eastern North America is Marcellus/Utica. this is why WCSB producers have lost market share on yearly basis since 2007.
Yasch22 wrote: I agree, Ceremony. But we know these facts:
WCSB producers are complaining about egress. A big part of the problem used to be the high tolls placed on gas headed east along the Mainline. Shipments used to be 6 bcf/d. They dwindled to about 1 bcf/d because of the high tolls, which TRP kept in place from 8 years ago to last November. The problems now are four-fold:
1. the tolls are still considered too high.
2. The Dawn price has been good so far, but there are no guarantees this will continue.
3. To get the Dawn price, gassers have to sign a 10-year deal, though they can get out with a year's notice after 5 years.
4. TRP has, so far, only allowed 1.5 bcf/d go through, even though they have capacity for more. When the Dawn reserves went low a while back, and the price skyrocketed, TRP chose to exclude WCSB from filling the defiicit (by jacking up tolls by about 10X) and went with American producers instead.
As we all know TRP wanted to convert the pipeline east to crude oil. That would have solved a big part of its problems with egress for oil producers in Alberta and Saskatchewan. As part of that whole long process, TRP (for better or for worse) chose to frustrate the NG producers with its high tolls, and it reduced the maintenance it needed to do to keep the pipeline running at full capacity. You can easily see the rationale for this: If they kept the pipeline running at top NG capacity, they would have single-handedly created a boom in NG producgtion, but then they would have been forced to kill off that boom by switching over to the more lucrative shipping of crude oil. In the meantime, they knew they could afford to close off the pipes to NG producers because they were facilitating the NG boom in the Marcellus and elsewhere. TRP's pipeline system in the States is massive, mostly dedicated to NG, and allows it fulfill the needs of all the utilities and Hubs throughout the eastern side of the Mississippi.
Now, the Energy East project got killed off. The Mainline could quite easily and with no great cost be built up to send 6 bcf/d to the East. The economics -- from a purely Canadian perspective -- are all in place. A tremendous number of Canadian gassers are viable at $2 to $2.25 per mcf in Canadian dollars. A lot of American producers seem to need $2.70/mcf US to break even.
That's where the information about pipeline mechanics comes in handy. You can see more and more how the constraints on Canadian production and the wide-open access for American production is a product of business decisions that are NOT directly connected to pure economics.