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Enron Mail |
Today's strong gas prices have opened a new window of opportunity for a
pipeline to move Wyoming gas into the Ventura market and downstream. Currently, Trailblazer is conducting an open season to expand its facilities for service between Wyoming and Gage County, Nebraska. A number of our contacts in the Powder River (including ENA) are making decisions on Trailblazer capacity right now. When we invested in the Bighorn gas gathering project in December of 1999 we viewed a connection between Bighorn and Northern Border Pipeline (250miles) as a strategic advantage to be exploited in the future. Strong gas prices and the ramp of Powder River production are accelerating the feasibility of making a pipeline out of the Northern Powder River Basin a reality. While connecting the Powder River Basin to NBPL using an intrastate pipeline through Montana remains a real possibility, it also carries with it the negative baggage of NBPL being fully contracted through 2003 (and possibly beyond) with Canadian gas and a potential for Alaskan gas. In the short term this presents us with some problems getting shippers to sign up for transport on the new Montana intrastate. I would like you to think about the following concept . A new interstate pipeline named "NBP-Dakota" extending from the Recluse, Wyoming area to Ventura, Iowa and going into service in November of 2003. A tentative design and cost would be 24" diameter, 1435 MAOP, 480 miles, with capex of approximately $270 million. Initial flow would be 300 mmcfd with expansion capability up to 490 mmcfd and an initial rate of just under 50 cents per mcf Recluse to Ventura. At today's Ventura price of $4.22 this could leave Powder River producers a margin of more than $2.00 an mcf. Using August, 1999, Ventura pricing of $2.64 the margin would be 64 cents. If we can build the pipeline at the cost projected, (NPNG has used Fort Union's actual construction costs for a 24 inch, 1440psi system - Enron Engineering would not even be in the same cost universe) "NBP Dakota" would be more competitive than sending the gas to NBPL via the Montana intrastate. I am of the opinion that future looping the Trailblazer system would come in as 3rd place to the other 2 routes. NBP Dakota would need to get started with an open season this fall to allow for a 2003 in-service date. THE QUESTION I need your opinion about using "NBP Dakota" for this opportunity rather than feeding more gas into NBPL in the northern Montana area. Strategically, are we willing to let NBPL carry the possible risk of decontracting after 2003 without support from the Powder River Basin ? For what it may be worth, I believe NBPL can handle that risk successfully without the Powder River volumes. I need to know your views on this as the Montana intrastate topic is coming up for discussion at the Bighorn Management Committee meeting later this summer.
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