Note:  The market reaction is interesting.  One can surmise that quite a bit 
of the gas that was contracted for on Vector is 
firm utility gas.  The run up in Chicago may be temporary until alternate 
arrangements are completed.

Vector Delay Confirms Market's Suspicions

Future shippers on the new Chicago-to-Dawn Vector Pipeline had their fears 
confirmed Tuesday when pipeline officials announced that the start-up date 
for the project, which was scheduled for Nov. 1 to coincide with the start-up 
of the long-awaited Alliance Pipeline, would be delayed until Dec. 1. 

Vector officials blamed the delay on the excessive rainfall that has hampered 
construction of the pipeline, which --- when completed --- would provide 
initial takeaway for about 700 MMcf/d of the 1.3 Bcf/d of western Canadian 
gas that will be shipped to the Chicago market by Alliance. Alliance is due 
to begin operations on Oct. 31. 

The announcement yesterday left many in the market asking the million-dollar 
question: "where will that [Alliance] gas go?" in the meantime. Alliance 
officials noted the line has connections with existing pipelines and LDCs 
serving the Chicago hub that could pick up the slack between Oct. 31 and Dec. 
1. 

Alliance's Jack Crawford downplayed the impact of the Vector start-up delay 
on Alliance. "We don't think [there will be] much effect at all. We have been 
working closely with Vector. Our connection with them, if it's not ready, is 
very close. We also have five other connections with other [existing] 
pipelines and LDCs" in Chicago. Many shippers "understand [that with ] a 
startup the magnitude of ours [Alliance] and Vector's, there are likely to be 
some bumps at beginning." 

Immediate market reaction to the news was somewhat unexpected. The Chicago 
basis for November widened from a plus 9.5-10 to plus 11-12 Tuesday following 
Vector's announcement. That is contradictory to what you would think would 
occur, said a Chicago trader for a large marketing company. "I was offering 
index-plus gas today betting on the chance that will come off by the time 
bidweek rolls around," he said. The effect on the market wasn't as profound 
as some would have thought, agreed another trader. "In fact, Chicago prices 
actually strengthened on the news. You would think that with the excess gas 
on the market starting Nov 1, the basis would have come off. The only thing I 
can think is that people are betting on cold weather showing up in the 
Chicago market on Nov. 1 as well." 

Meanwhile Dawn prices, which one would have expected to strengthen following 
the news, did so, as November basis widened from low 30s to plus 36 yesterday 
following the announcement, a Michigan trader said. 

The Vector Pipeline would transport much of the Alliance gas from the market 
hub in Chicago to the hub at Dawn, ON, as well as provide access to markets 
and storage in the upper Midwest. The line eventually will carry 1 Bcf/d, but 
its initial start-up delivery capacity will be 700 MMcf/d. The pipeline is 
slated to serve key markets in Ontario, Quebec, and the U.S. Midwest and 
Northeast. 

~Vector shippers were notified of the delay along with the rest of the market 
Tuesday, although many already had suspected the pipeline wouldn't be able to 
adhere to its scheduled start-up date. At an LDC forum in Chicago a few weeks 
ago, a spokesman for Vector insisted the pipeline was on schedule, but then 
sources said he showed pictures of parts of the pipeline underwater. "Folks 
who were there knew what that meant." 

Presently, more than 90% of the Vector line has been installed and progress 
on the Springville compressor station is on schedule, according to the 
company. The Dec. 1 start-up date includes adequate time for any further 
weather impacts and for the extensive commissioning and testing programs 
necessary, it said, adding Vector is scheduled to begin filling the system in 
late October to complete the commissioning of facilities. 

Sponsors of Vector include Calgary-based Enbridge Inc. with a 45% interest; 
Westcoast Energy Inc. of Vancouver, BC, with a 30% interest; and 
Detroit-based MCN Energy Group Inc. with a 25% interest.