Untitled Document
Untitled Document

Spectra’s plans to move Marcellus and Utica gas

Housley Carr for RBN Energy

Surging natural gas production volumes in the Marcellus/Utica will need to move in just about every direction. No single market—not the Northeast, the Midwest, the Southeast, or even the Gulf Coast—is big enough to absorb it all. Midstream companies are considering every cost-effective way to replumb and expand their existing pipelines to add takeaway capacity, and when still more is needed, are turning to greenfield projects. In this, the first of several company-by-company episodes on who is planning what, we examine Spectra Energy’s plans to add at least 2 Bcf/d of new Marcellus/Utica takeaway capacity by 2017, and maybe another 2 or 3 Bcf/d by the end of the decade.

In Part 1 of this series, we recapped how quickly gas production has been growing in the Marcellus/Utica (from 2 Bcf/d in 2010 to more than 15 Bcf/d now and an estimated 22 Bcf/d by 2019), and how the regional and interregional pipeline network has been playing a very challenging game of catch-up. Production in the “dry gas” area in northeastern Pennsylvania (now at 7.8 Bcf/d) is set to rise to 10.6 Bcf/d within five years, but production in the “wet gas” areas of southwestern Pennsylvania, eastern Ohio, and West Virginia is expected to grow even faster—doubling from the current 3.5 Bcf/d to 7.7 Bcf/d by 2019. We also noted that a lot of the initial push on increasing takeaway capacity involves moving gas from northeastern Pennsylvania into New York, New Jersey, New England and Ontario (and moving NGLs out of the Utica and the wet Marcellus areas). In this series we will provide brief updates on projects we introduced in blogs over the past several months, including a number still under development.  But we will primarily focus on newer projects—many which involve making existing pipelines bi-directional to move large volumes of Marcellus/Utica gas to LNG export facilities planned for the Gulf Coast. We begin with a review of Spectra’s plans, which as Figure #1 shows, include projects that encircle the Marcellus/Utica and will have effects as far south as Louisiana.

Figure #1

Source: Spectra Energy investor presentation

As we said in Gulf Coast Gas, We Don’t Need Ya Anymore—Spotlight on Spectra more than a year and a half ago, the company’s initial efforts in this space focused on moving Marcellus/Utica gas into nearby markets in the Northeast. Spectra owns Texas Eastern Transmission (TETCO)—one of the old-style Gulf Coast-to-market mainlines—and Algonquin Gas Transmission (AGT), which picks up where TETCO leaves off in New Jersey and moves gas into New England. Two of the company’s biggest Marcellus/Utica-related projects were its New Jersey-New York Expansion project (completed last fall; see Another Gassy Day in New York City—The New Gas Pipelines), and Texas Eastern Appalachia to Market (TEAM) 2014. The latter - now under construction and expected to come online in November (2014) - is one of several related efforts by Spectra to repurpose TETCO from the Marcellus/Utica region to the Gulf Coast to allow bi-directionality and the southward flow of 600 MMcf/d along the mainline. Next up is TEAM South, a modest-cost (less than $50 million) effort that by November (2014) will allow up to 300 MMcf/d to flow south from TETCO’s Zone M2 west of Uniontown, PA to its Zone ELA in Mississippi. A more capital-intensive project, the $500 million Ohio Pipeline Energy Network (OPEN), will consist of 76 miles of new 30-inch-diameter mainline pipeline from the Kensington processing plant in the heart of the Utica in Columbiana County, OH (the top of the short blue arrow in Figure #2 below) to an interconnection with TETCO’s system at Clarington, OH, as well as reverse-flow modifications at existing compressor stations along TETCO’s mainline in Ohio, Kentucky, Mississippi and Louisiana. The fully subscribed, 550 MMcf/d OPEN project will begin operation in the second half of 2015.

Figure #2

Spectra Energy website

Also planned for a late-2015 startup is Spectra’s Uniontown to Gas City (U2GC) expansion project, another bi-directional flow project that will allow up to 425 MMcf/d of Marcellus/Utica gas to move from Uniontown, PA to U2GC’s existing interconnection with Energy Transfer’s Panhandle Eastern Pipe Line near Gas City, IN (midway between Indianapolis and Fort Wayne) for redelivery to Midwest markets. Spectra submitted its application to build U2GC to the Federal Energy Regulatory Commission (FERC) in March (2014). Taken together, TEAM 2014, TEAM South and U2GC will pretty much max out TETCO’s ability to move Marcellus/Utica gas to the Gulf Coast using its existing pipelines. Additional southbound capacity from Spectra would likely need to come from new-build pipelines.

New-build was the only option to move large volumes of Marcellus/Utica gas to Union Gas’s Dawn gas storage and trading hub southeast of Sarnia. ON. Spectra’s proposed $1.2 billion, 250-mile Nexus gas pipeline, which is being co-developed with Enbridge and DTE Energy, would run west from northeastern Ohio to near Detroit, where it would utilized the existing Vector Pipeline to reach the Dawn hub (see Figure #3). As we explained in Return to Sender Natural Gas Exports—The Battle for a New Dawn, Ontario gas demand is expected to rise by one-third (to 3.3 Bcf/d) by 2020 (mostly due to new gas-fired power generation) but the old paradigm of delivering the province’s gas needs via long-haul pipelines from Western Canada, the Midcontinent and the Rockies is ending.

 Figure #3

Source: Spectra Energy Presentation

According to Spectra’s most recent (May 7) investor call, three as-yet-unidentified local distribution companies (LDCs) have signed agreements to use a portion of the Nexus project’s 1 Bcf/d anticipated capacity, but more signups are needed to justify proceeding with the project. Spectra expects producer contracts to follow in the next few months. Nexus could come online as soon as 2017.

To the south and also targeted for a 2017 startup is Sabal Trail, a 460-mile, 1.1 Bcf/d planned by a joint venture of Spectra and NextEra Energy (corporate parent of Florida Power & Light, or FPL) that will run from Station 85 (in west-central Alabama) on Williams’ Transco mainline to near Orlando. On its face, Sabal Trail may not seem like a Marcellus/Utica-related line, but it is. As we discussed in Miami 2017—Marcellus Gas Headed to Florida, Williams’ Atlantic Sunrise project will allow large volumes of Pennsylvania- and West Virginia-sourced gas to flow south on Transco to—you guessed it—Station 85. That connection will give FPL (now building its fifth and sixth new 1,250-MW gas units since 2010) a gas-supply alternative to its traditional Gulf of Mexico and Gulf Coast sources. (Duke Energy Florida, the state’s other big electric utility, will use Sabal Trail to deliver gas to a new build 1,640-MW gas generation unit it announced plans for May 13.)

Spectra has one other project; it is in very early stages of planning, and it would be one of the company’s biggest ever. Spectra confirmed to us in mid-May that in response to a new Duke Energy/Piedmont Natural Gas request for proposals (something we will get to in our next episode), it will propose a $4 billion, 1.1 Bcf/d gas pipeline that would run 427 miles from Bedford, south-central Pennsylvania, to North Carolina. The project, which would come online in late 2018, is not a certainty yet, but it may turn out to be one of a small number of new-build pipelines to come out of the Marcellus/Utica by the end of this decade. To keep this rundown of Marcellus/Utica gas pipeline projects flowing, so to speak, we will pick up next time with a discussion of a few other Williams projects now under development (and provide an update on Atlantic Sunrise itself). Williams’ focus, understandably, is on projects that give the Transco mainline “reach” into other potentially lucrative markets for Marcellus/Utica gas in the Southeast. While we are at it, we will consider a few other, related projects in the region on the drawing boards at Dominion Transmission, Duke Energy (Spectra’s old owner), and Piedmont Natural Gas. All have Marcellus/Utica gas on their minds.

Continue to Part three of this series by clicking here.

 

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