B.C. pipeline explosion strands natural gas output, cuts into wellhead prices

CALGARY — A pipeline explosion in B.C. on Tuesday is interrupting natural gas deliveries and cutting into the cold weather price bonus Canadian gas producers had been enjoying for the past few weeks.

More than 1.6 billion cubic feet per day — roughly 10 per cent of Western Canada's daily natural gas output — was stranded when Enbridge Inc. halted transport on the 36-inch line that exploded near Prince George, B.C and on its neighbouring 30-inch line.

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The National Energy Board allowed Enbridge to restart the smaller line at a lower pressure, but analysts say that still leaves between 600 million and 800 million cubic feet per day of gas without an easy path to market.

"There are not a lot of other routes for gas to reach Vancouver or for export," said Ian Archer, associate director for IHS Markit, pointing out about one billion cf/d of the normal daily payload is headed for export into Washington.

"It was the mainline that went out. So I would assume this is Enbridge's absolute No. 1 priority to get fixed."

Prices at the main interior B.C. trading hub have crashed to about $1 per thousand cubic feet from around $2.60 before the incident, said commodity analyst Martin King of GMP FirstEnergy.

"For those that can get gas out, prices at Station 2 have come down quite a bit because the line break is south of the trading point," said King, adding producers who can't get their gas out will have to shut down their wells.

Some B.C. gas is being redirected into Alberta markets, Archer said, causing prices there to slip from around $2.50 per gigajoule (an energy unit that's similar in size to 1,000 cubic feet) to just over $2.

The analysts say they expect Enbridge will restore the pipeline to service within a week or two, given the lack of damage to the parallel line and the high priority of restoring gas to residential markets in B.C. at the beginning of winter.

Alberta and B.C. gas prices had jumped in recent weeks thanks to more demand because of unusually cold weather in Alberta.

Follow @HealingSlowly on Twitter.

Companies mentioned in this article: (TSX:ENB)

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