UPDATE 2-Alliance shuts 1.6-bcfd natgas pipeline; Chicago prices up

(Add statement on timing of restart in paragraph 3)
By Nia Williams
CALGARY, Alberta, Aug 7 (Reuters) - Alliance Pipeline
APLP.UL shut its Western Canadian 1.6 bcfd pipeline that feeds
natural gas to Chicago on Friday after poisonous, flammable gas
got into the system, forcing at least five producers to curb
output and lifting Chicago prices.
The company declared force majeure on the 2,400-mile (3,850-
km) pipeline, which delivers gas from Western Canada and North
Dakota's Williston Basin to the Chicago market. It accounts for
about a third of Canada's daily net exports to the United
States.
Alliance said it expects the shutdown to last several days
and will offer a more precise timeline when plans are finalized.
Alliance, a limited partnership owned by affiliates of
Enbridge Income Fund Holdings ENF.TO and Veresen Inc VSN.TO ,
told shippers late on Thursday that hydrogen sulphide, a
hazardous gas, entered the mainline pipeline system as a result
of complications experienced by an unnamed upstream operator.
Seven Generations Energy Ltd VII.TO and RMP Energy Inc
RMP.TO were forced to shut in essentially all their production
after Alliance called for suppliers to suspend injections for an
indeterminate period, starting on Friday.
NuVista Energy Ltd NVA.TO and Crew Energy CR.TO have
also suspended a portion of their output, as did Cequence Energy
Ltd CQE.TO . In a statement, Crew said it expected service to
resume in three to four days.
Gas prices in Chicago MC-CHICIT-IDX , one of the biggest
U.S. hubs where most of the Alliance pipeline gas ends up, rose
about 7 cents to $2.91 per mmBtu on Friday.
"Downstream prices around the Chicago market may increase as
alternative sources of supply are sought, though, milder weather
and the coming weekend may limit a rally," analysts at energy
intelligence firm Genscape said in a note.
Genscape said upstream producers that do not shut in
production will likely redirect gas to Spectra Energy (NYSE:SE)'s SE.N
Westcoast systems or TransCanada Corp 's TRP.TO NOVA pipeline
in Canada.
ICE next-day gas prices at the Kingsgate hub on the
U.S.-Canada border, which moves gas from the TransCanada system
in British Columbia to the U.S. West Coast, were down about
three cents to $2.48 per million British thermal units.
Some other next-day gas prices in the U.S. Northwest at
Stanfield W-PGTSFP-IDX and Malin W-PGTMAL-IDX in Oregon were
however slightly higher.
Alliance spokesman Rob Gray did not give details of how the
hydrogen sulphide gas entered the system and said the first
priority was safety.
It plans to get rid of the natural gas affected by flaring
it at its Alameda compressor station in Saskatchewan.