Alliance Deliveries Delayed until Nov. 13

In a move that is likely to send ripples through the market, particularly 
around Chicago, the 1.325 Bcf/d Alliance Pipeline extended its commercial 
in-service delay last week to Nov. 13 from Oct. 30. Pipeline officials said 
moisture and debris in the line caused the delay. 

"As we have increased the flow of test gas volumes during our system 
commissioning, we have encountered moisture and debris from construction," 
said CEO Norm Gish. "Specifically, most of the debris is in the form of small 
pieces of foam from the [smart] pigs that were used to remove the hydrostatic 
testing water from the line. The problem forced us to shut down the system 
for short periods of time to clean out accumulated debris. 

"We have since designed and installed additional in-line screens at our 
compressor stations. The situation is improving and we are removing 
ever-decreasing amounts of debris with increased flows of test gas. However, 
this situation has not permitted us to run our system with the significant 
volumes necessary to adequately test the reliability of our compressors." 

It is the second time Alliance has had to delay its in-service date. In early 
September, Alliance officials said rain in Saskatchewan this summer, 
directional drilling problems at a creek in British Columbia, complex 
connection problems with the Aux Sable liquids plant in Illinois and 
connection delays with several U.S. pipelines and LDCs was to blame for a 
one-month delay to Oct. 30 (see Daily GPI, Sept. 11). 

The pipeline will continue increasing test volumes until it begins commercial 
service, said Gish. There currently is about 500 MMcf/d of test gas in the 
line. He expects firm delivery capacity to reach the full 1.325 Bcf/d prior 
to Nov. 13. 

Alliance officials also noted that this is the first time a pipeline the size 
of Alliance has been brought on stream at one time. 

Regardless of the challenge, however, market participants were expecting the 
system to be delivering gas starting at the beginning of the month of 
November and this delay is likely to have a significant impact on November 
bidweek trading. 

One Chicago trader said he had a strong suspicion something was fishy when 
his index offers were lifted Friday afternoon by a marketing company, which 
he knows to own capacity on the pipe. "Everyone was a buyer of index gas 
today for November, especially those now short for the first 13 days. I sold 
mine at NGI plus 1.5, but had I known that Alliance was delayed I would have 
held out for something a little better." 

Basis, meanwhile, was pretty much unchanged at +13 to +14 for November. "It 
takes a lot to move the Chicago basis," he said.