Last Updated February 13, 5 pm ET. Please scroll to the bottom of the article to see our latest update.
On Monday, January 21, Enbridge’s Texas Eastern (TETCO) natural gas pipeline suffered an explosion on a 30” line in Noble County, Ohio. TETCO is one of the largest natural gas pipelines by mileage and volume in the U.S., consequently the outage immediately cut nearly 1.5 Bcf/d of Marcellus gas from TETCO’s Market Zone 2 (M2) flowing south and west to Midwest and southern markets. The restrictions came at a time when demand across TETCO-served regions faced periods of strength with the winter season and shots of unseasonably cold weather. We did not receive any notification of an official timeline for repair by the time we published our first notification of the event to our clients in Basis Commentary on Tuesday, January 22.
In April 2016, TETCO experienced a similar explosion on another 30” line in Pennsylvania in the M3 Zone. During the 2016 event, flows completely shut-off for 11 days and subsequently ran at notably restricted levels for nearly six months. Therefore, we expect it could take anywhere between six weeks and six months for flows to return from restricted levels. However, partial restoration of service is possible due to an existing parallel line to the impacted 30” line.
The Explosion on January 21
The explosion occurred at 10:40am EST, which left two people injured and three homes damaged. Although flows through TETCO’s Berne 30” South line trended downwards in the week preceding the explosion, the restrictions due to the explosion represent a cut of up to 1.5 Bcf/d compared to the 30-day max. In addition to flow cuts on the Berne 30” South line, restricted westward capacity on TETCO’s 24” line resulted in an additional 95 MMcf/d day-over-day drop in flows through TETCO’s Lebanon, OH compressor. Flow effects were evident as far downstream as TETCO’s Gillis interconnect with Creole Trail, which supplies Sabine Pass LNG, with a 225 MMc/fd drop in nominations day-over-day. (Note: Total Creole Trail deliveries to Sabine, however, remained relatively flat due to other interconnects serving the facility). Evidence of restricted flows along several different points indicates that this explosion impacted multiple lines, rather than remaining an isolated incident. In addition to the cuts to and rerouting of flows, some market participants anticipated this event would widen price spreads between TETCO M2 and TETCO’s demand hubs in M3 and the Gulf Coast.
In each section below we outline the impacts of the explosion as our analysts received new information.
Flow Update – January 23
On January 22, TETCO published a notice regarding the event. The pipeline stated that north to south capacity through the Berne, OH 30” compressor cut flows by another 0.5 Bcf/d for the remainder of the gas day and will then continue to decline to net zero beginning January 23. As a result, there was a 1.4 Bcf/d drop in flows from January 21, and a 2.2 Bcf/d reduction in flows compared to the 30-day max. Associated restrictions on the 24” Line westward out of M2 lifted and consequently revised upwards.
M2 basis fell $0.115 from -$0.22 on 1/18 to -$0.335 in January 22 trading, and the WLA – M2 spread widened by $0.185 to $0.295 in the same time frame. This shows that producers fought to get their gas out of M2, and demand hubs incentivized flows to adequately serve demand.
Enbridge issued statements regarding this incident to shed light on the potential reason for such an explosion. However, they stated that “this section of pipe… was built in 1952-53” but “an in-line inspection of the line was performed in 2012, and no remediation was needed.” Meaning that as of its last inspection, the pipeline seemed in good shape.
Production Update – January 23
While at first it seemed that production in the area declined dramatically, later revisions by the pipeline proved that producers in the area could reroute the gas onto other pipelines, restoring total production in the region. It appeared on January 21 that with no available path to travel south, production points along TETCO shut-in. Flows through nearby and downstream compressor stations decreased by around 1 Bcf/d, in similar magnitude to the initial production decline out of the basin. Running at full capacity, the Berne 24” station could not take any rerouted production from the Berne 30” line station. Total production along TETCO in the northeast decreased 95 MMcf/d from January 20-21 in Ohio and Pennsylvania. Production dropped even further on January 22, when the pipeline published an update to their previous postings, informing shippers that all north to south flows would reduce further and the compressor station would completely shut-in beginning January 23. An updated notice from TETCO stated that no receipts would come from north of Berne, a major producing region of the Marcellus/Utica basin.
Production Update – January 24
Regional pipelines later revised initial production drops on January 24, which added around 1.1 Bcf/d to the northeast production scrapes for January 23 and about 615 MMcf/d for January 22. Producers in the area rerouted gas that would normally be delivered onto TETCO into West Virginia from the Majorsville Processing Plant interconnect with Columbia Gas Transmission and Rover Pipeline, as well as in Ohio through an interconnect with Rockies Express Pipeline.
Flow Update – January 25
Texas Eastern released two updates regarding the 30” Line Force Majeure detailing the nature of the impacted system and progress to repairs. TETCO has three lines between its Berne, OH and Athens, OH compressors that make up its 30” system in this area: Line 10, Line 15, and Line 25. TETCO restricted north to south capacity through the Berne compressor station to net zero through the station by isolating Lines 15 and 25 to investigate the incident. TETCO is working to return Line 25 to service as soon and as safely as possible. The first notice from TETCO speculated that partial service might be available by the evening of January 24, which we did not see as of the Intraday 9 pm cycle. The second added that roughly 1 Bcf/d could return to service through the Berne CS between January 28 and 30. We saw flow revisions indicating 130 MMcf/d of southbound flows on the Berne 30” compressor for January 23 and a northbound flow reversal as of the early cycles of January 25 despite the notice indicating net zero flows. Due to Genscape’s unique real-time data, we can identify when actual flows contradict what the pipeline company releases.
Flow Update - January 28
On the morning of January 27, TETCO restored 1.54 Bcf/d of southbound capacity through its 30" line. At the time of this update only 309 MMcf/d is scheduled though the Berne 30" compressor station for January 28, indicating that flows have yet to return to full capacity. Further investigations were required over the weekend on Line 10 between Athens, OH and Uniontown, PA compressors. The ~200 Mmcf/d reduction in capacity beginning January 27 demonstrated the effects of the investigation. As of January 28 there is no ETA for a return to service for the Uniontown compressor station.
Genscape's Proprietary Reconnaissance - January 25
On January 25 Genscape conducted a flyover of the explosion on TETCO's mainline. From the images our analysts derived that the pipeline is in the process of restoration with physical impacts from the explosion seen surrounding the site.
Genscape's Proprietary Reconnaissance - January 31
On January 29, Texas Eastern released another update regarding the 30” Line Force Majeure. The Line 10, valve section 4 between the Holbrook, PA and Uniontown, PA compressor stations returned to service. Capacity through the Uniontown CS restored to 4.39 Bcf/d after being limited to 4.20 Bcf/d for January 27 to 28. Since January 22, capacity through Uniontown is over 95 percent utilized.
Line 15 capacity south of Berne remains at roughly 1.5 Bcf/d. Despite elevated demand and prices in M3 and other demand regions in the Northeast, M2 prices remained depressed.
On January 31, Genscape flew over the repair site for the second time to gauge progress. Imagery shows that the site is overall more refined – there is a clear and level parking lot for the response team’s vehicles, a suite of generators, lights and heaters, and environmental fencing delineating the edges of the site. Two excavators and a bulldozer are present on site to assist.
Notably, the trench from last week is much smaller, with the access road restored over the top of the buried replacement pipe segment(s). The sections of pipeline that we saw capped last week have been/are actively being tied into the new section, with a shade tent and welder nearby suggesting continued active welding or testing.
While the physical pipe repair looks to be close to complete, it is worth noting that returning the line to service will take additional testing after the welding and backfilling phases of the repair have finished. Even after the initial return to service, the line may operate at a reduced pressure for several months while additional testing continues.
We will continue to update clients on changes in flows and production volumes in our daily Basis Commentary and through this blog throughout the week. Stay tuned!
Genscape's Proprietary Reconnaissance - February 13, 2019
We flew a reconnaissance plane over the site of the TETCO Berne explosion on Friday, February 8 to check on the repair progress. Images collected from this flight show the site is still under heavy construction, though it’s not clear what still needs to be completed or what the current efforts are towards completion. However, we believe there may be some additional repairs underway beyond the replacement of the ruptured section of pipeline, possibly including a second replacement across the original rupture area.
In the photo below, the excavator seems to be digging a new hole in the flattened area that the bulldozer smoothed over last week, while the pipe running under the road (which we previously thought complete and tied in) appears removed. This may reset the timing on the repair clock back by a week or more, depending on what workers discovered during testing. The excavator unearthing a segment of a recently restored mainline suggests that, as suspected, there may be damage to the mainline above.
The extent of the damage to the pipe and what needs to be repaired are still large unknowns. It does not look like this is a simple fix and we believe the pipe will stay out of service for some time.