NATURAL GAS PRODUCTION BOOM BOOSTS DEMAND FOR PIPELINES.
TransCanada expansion oversubscribed
• Natural gas producers want more pipeline space than many midstream companies are offering and have oversubscribed to two new expansion projects in the last week.
TransCanada Corp. announced Wednesday that natural gas producers had bid for more space on a new $ 2- billion expansion of its Nova pipeline system than was available.
“We had more people in the queue than ultimately signed contracts,” TransCanada president, Canada and Mexico natural gas and energy Karl Johannson said.
Johannson said natural gas production from the prolific Montney, Duvernay and Deep Basin formations is surging and gas reserves in those formations has grown to the point that, “I think people have stopped counting.”
The expansion project will allow gas producers in northwestern Alberta and northeastern B.C. to move an additional 2.6 billion cubic feet of gas per day out of the field and into pricing hubs. It will also allow producers to send 400 million cf/d to markets in California, Nevada and the Pacific Northwest.
TransCanada is already spending $ 5.1 billion to expand of the Nova system in a series of projects that will add another 4 billion cf/d of capacity.
Wednesday’s announcement marks the second time in a week that Calgary-based pipeliners announced demand for space on new lines had significantly outpaced what was being offered.
During an investor presentation last week, Enbridge Inc.'s president of gas transmission and midstream, William Yardley, said that natural gas producers had submitted bids totalling three times the capacity of a 190 million cf/d expansion of its T-South line in British Columbia.
“There’s a huge amount of capital that’s being spent,” AltaCorp Capital analyst Dirk Lever said of the natural gas pipeline expansion projects.
In addition to TransCanada and Enbridge, Lever said that Veresen Inc. and Pembina Pipeline Corp. had announced projects to expand natural gas infrastructure in northwestern Alberta and northeastern B.C.
Some of those projects involve adding new compressor stations, rather than new pipes, to expand capacity.
“There’s so much drilling going on in new areas and those new areas need to be serviced,” Lever said, adding, “The infrastructure there has been insufficient.”
On Tuesday, Alliance Pipeline L. P. announced part of its gas pipeline to Chicago had shifted as a result of heavy rain near Grande Prairie, Alta., and the company declared a force majeur, leaving some producers scrambling to find space on near- full competing pipeline. Other producers were forced to shut-in some of their production.
The event reduced shipments on Alliance, which is jointly owned by Enbridge and Veresen, by 500 million cf/d, or 31 per cent of the line’s capacity. Like others, that line had been full and the owners have asked gas producers to commit more volumes to expanding it.
Johannson said he expects gas producers will demand even more pipeline space as production continues to grow, so long as companies connect those producers with diverse markets in Canada and the U.S.
“I expect more production to come on the system and I know the producers are far more interested today in how they’re going to take it off the system,” he said, adding, “in order to expand your production, you need market.”