Gas competition is heating up in Chicago, and Gulf suppliers may be the losers.
Chicago promises to be an exciting market in the natural gas industry during the next few years, as it becomes home to more than a billion cubic feet per day (Bcfd) of Canadian supplies. The birthplace of the electric blues is poised to become center stage for a super-charged competition among gas producers from Canada, the Rocky Mountains and the Mississippi delta.
By late 2000, the Alliance Pipeline in the Midwest will enjoy 1.2 Bcfd of additional natural gas capacity. This, in combination with last year's Northern Border Pipeline expansion, will expand natural gas capacity into Chicago by almost 2 Bcfd - an increase of nearly 25 percent in two years.
Because gas on the Alliance pipeline will arrive in Chicago as wet gas (having heavy gas compounds in the gas flow and requiring processing), almost none of it can be diverted to other markets before it hits Chicago. Moreover, the shippers on Alliance pipeline generally are committed to the system with long-term, take-or-pay contracts.
U.S. gas production in the Rocky Mountain and Gulf regions is projected to increase during the next few years. The large influx of Canadian gas into the Midwest could shake up U.S. gas markets, and the Chicago Hub likely will be the crossroads for gas competition. Unless the local market grows rapidly or supplies are trans-shipped to the Northeast, current supplies may be displaced by Canadian gas.