IS NEXUS BASED ON SPECULATION?
THERE IS LITTLE CANADIAN INTEREST IN NEXUS
Nexus plans to ship 51% of their capacity to Dawn in Ontario. However, there does not appear to be much Canadian interest in Nexus gas primarily because its delivered COST will be the highest and they fear the strong potential for stranded pipeline costs being passed on to ratepayers.
NEXUS GAS WILL COST CANADIANS MORE THAN GAS FROM OTHER SOURCES
In the recent Ontario Energy Board (OEB) Natural Gas Market Review (February 2016), a number of Ontario organizations voiced their concerned with Nexus (and Rover) plans to ship gas to Dawn.
Pipelines from Marcellus/Utica via the Niagara, Chippawa and Waddington, New York interconnect points are more cost effective for Ontario consumers than Rover/Dawn.
The landed cost of gas into the Enbridge service area (Toronto) would be lower from Niagara ($4.90 $CAD/GJ) and Waddington ($5.30) than from Vector ($5.55), Rover ($5.73) or NEXUS ($5.82).
Firm contracts for gas supply from New York to Ontario through Niagara and Chippawa will rise to nearly 1.1 Bcf/d in the winter of 2016/17. TransCanada expects to be able to service this reversal of flow for only $30 million.
The flow reversal is proceeding with Waddington (NY) shipments to Ontario expected in November of 2017. This reversal of flow will also be at low cost.
CANADIAN BUSINESS ASSOCIATIONS PREFER ALTERNATIVES TO NEXUS Associations representing industrial gas users, property owners, power producers and manufactures write in Canadian OEB filings:
Associations are concerned that expanding the Dawn Parkway pipeline to ship the additional Nexus and Rover gas from Dawn eastward will result in SIGNIFICANT GAS RATE INCREASES according to financial calculations.
Canadian associations want to avoid “burdening pipeline builds” for the 40 – 50 year life of a pipeline and the potential to pay for these stranded assets. They recommend lower cost NY pipeline alternatives, market based, non-facility solutions (such as displacement, shipping gas directly from Niagara to Parkway) and investing in technology to cut gas usage and GHG.
The associations firmly believe Canadian regulators will act to reduce GHG and natural gas consumption. (In Canada, natural gas is seen as a contributor to GHG gas emissions and not as a solution – as in the US.)
HOW MUCH GAS CAN NEXUS REALLY PLAN FOR CANADA?
Nexus says they plan to ship .76 Bcfd to Dawn thru the Vector pipeline. However, Vector has applied to FERC to abandon only 455,000 Dth/d of firm capacity to lease to NEXUS.https://www.snl.com/InteractiveX/article.aspx…
Vector’s capacity is 1.3 Bcfd and Rover plans to ship 1.3 Bcfd thru it. How can these companies ship over 2.0 Bcfd thru a 1.3 Bcfd capacity pipeline?
Canada does not need this much extra gas. Ample supplies of gas are already transported to Eastern Canada thru Michigan and New York today.
ONTARIO ELECTRIC DEMAND FLAT: The Ontario grid operator sees flat 18-month electric demand thru 2017. 950 MW of wind and 140 MW of solar will be added during this period, plus ongoing conservation initiatives. https://www.snl.com/InteractiveX/article.aspx…
Quebec already gets 99% of its electricity from renewable sources (mostly hydro).
Except for a 100% ethane plant in Sarnia, no new petrochemical plants are planned for Eastern Canada.
There is little potential to ship Nexus gas to the US and Canadian east coasts for LNG export. US east coast pipelines are destined to supply those US states, and for the few US and Canadian LNG export plants possible, they already have designated east coast pipelines. It appears no LNG plant north of Maryland has received financial approval.
NEXUS AND ROVER ARE ESSENTIALLY DUPLICATES
They start near Clarington Oh. Basically follow the same route, come within 7 miles of each other in Ohio and end at the Vector pipeline on the way to Canada and the Dawn Hub. It appears ALL of Nexus’ Market Segment pipeline capacity (1.3 MMcf/d) and 51% (.76 MMcf/d) of total Nexus capacity is planned for Canada.
IS NEXUS BASED MORE ON SPECULATION THAN REALITY?
Nexus has firm agreements for only 56% of the capacity and has told FERC, “Nexus understands and is willing to bear any risk of unsubscribed capacity.” Nexus is mostly a producer driven pipeline based on the desire of financially unstable drillers to sell their gas anywhere they can.
Chesapeake – a Nexus anchor shipper – has suspended drilling in Marcellus and Utica. They are almost bankrupt which means they could cancel their contracts or at least bargain for a much lower volumes and rates. Fitch has downgraded Chesapeake’s credit rating to their lowest “highly speculative” rating of B-. FERC must investigate if other Nexus shippers have similar financial troubles.
Nexus cannot claim new sources or new markets. Considerable Marcellus and Utica gas is already flowing to Eastern Canada thru Michigan and New York. These existing pipelines provide gas to Canada at lower cost, thru multiple locations and without Nexus’s environmental degradation.
Building Nexus will negatively impact, if not destroy, thousands of acres of US forests, farmland, wetlands and other property. This is in addition to intimidating thousands of property owners.
It appears Nexus is mostly based on SPECULATION vs. the real market needs of actual users. Will FERC approve Nexus and allow the destruction of thousands of acres based on this much speculation and uncertainty?