TransCanada and National Fuel Gas to build natural gas pipeline

Sep 06, 2001 02:00 AM

Energy demand in the north-eastern United States, despite the slowing American economy, is behind a proposed $ 400-mm natural gas pipeline between Ontario and Pennsylvania. TransCanada PipeLines of Calgary announced that it is teaming up with National Fuel Gas of Buffalo, NY, to build the 346 km line. The so-called Northwinds pipeline would connect the existing gas hub at Dawn, Ontario, near Sarnia, to Buffalo and then proceed south to a hub in Leidy, Pennsylvania.
Canadian natural gas is shipped to Dawn by both TransCanada's network and the Alliance Pipeline. "There's certainly a demand pull from the New York area to bring more gas into the Leidy area and then the hub-connected areas from there," said Greg Stringham, a vice-president at the Canadian Association of Petroleum Producers.
"With the electric demand growth that is going on there - although it has tempered somewhat with the economy slowing down - I think what it does is provide another opportunity or route for gas to get into that area that wasn't there before."

The project, which requires approval from regulators and shippers, is expected to include a cross-border tunnel near Buffalo. "Northwinds Pipeline is tailored to meet the needs of the mid-Atlantic and New England markets, which are among the fastest-growing markets on the continent," TransCanada CEO Hal Kvisle said in a release.
TransCanada and National Fuel said the route was not finalized but they have done initial technical, environmental and market assessments and decided to go ahead. "This project will strongly enhance TransCanada's existing and proposed natural gas transportation systems from the Western Canada sedimentary basin to Eastern Canada to the north-eastern United States," said Kvisle.
The line's initial capacity would be about 500 mm cfpd of natural gas. Imports from Canada are crucial to meeting US demand for natural gas, the fuel for more than 90 % of new power plants being proposed to ease electricity shortages.

Interest in Canadian energyhas been growing steadily among large US energy companies and in the administration of President George W. Bush. Oklahoma-based Devon Energy announced it would pay $ 4.6 bn for Anderson Exploration, one of Canada's last large independent companies with large natural gas holdings.
Bush has made it clear that he considers Canadian oil and gas a key part of his strategy to quench America's energy thirst while becoming less reliant on Middle East oil. National Fuel CEO Bernard Kennedy said the proposed Northwinds pipeline is "uniquely positioned to be a part of a solution for long-term energy security" by using a lot of existing infrastructure to bring low-cost gas to eastern US markets.
"Our existing systems are located at the Canada-United States border and provide the path for new gas supplies to reach markets in western New York, north-western Pennsylvania and beyond," said Kennedy. Randy Ollenberger, a pipeline analyst with Merrill Lynch in Calgary, said the line would help relieve bottlenecks of gas. "Overall, North American gas demand has been growing in the range of 2 % a year or so, and the bulk of that is in the United States -- and that requires growing amounts of imports of Canadian gas."

The two companies estimate they could have the Northwinds line completed by late 2004, but Ollenberger said the proposal is not a done deal yet. "It's pretty early days and we'll have to wait and see whether or not shippers step up and take some capacity."
Enthusiasm to tap natural gas fields in Canada's Arctic and off the Atlantic coast was high in the first three months of the year when prices hit records averaging $ 9.25 per thousand cf of gas. But with current prices below $ 3 per thousand cf, mega projects may prove uneconomical. CAPP's Stringham said the plunge in natural gas prices has been an "eye opener" to many in the industry.
"It does simply indicate to people that we've had the highs of earlier this year down to the lows, so we're in a very volatile market," he said. "The longer-term projects are going to have to take a very close look to justify things like northern gas or deep gas or offshore gas."

Source: Canadian Post
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