NEB decision to deny TransCanada Komie pipeline a victory for Spectra Energy – Financial Post
Jeff Lewis writing in the Financial Times from Calgary reports: ”TransCanada Corp.’s advance into the remote shale gas fields of British Columbia has been temporarily stalled amid concern that a proposed 100-kilometre expansion to its B.C. pipeline system would “unreasonably subsidize” users of the addition.”
“Canada’s National Energy Board on Thursday rejected an application by TransCanada subsidiary Nova Gas Transmission Ltd. (NGTL) to connect B.C.’s isolated Horn River shale gas play to its 24,000-kilometre pipeline system, saying that a “rolled-in” tolling structure proposed for the project “would unreasonably subsidize the extension of the NGTL Alberta system into an area where it would compete with infrastructure already in place.”
“The decision is a victory for transportation rival Spectra Energy Corp., which operates in B.C. as Westcoast Energy Inc. It argued in hearings that TransCanada’s practice of bundling tolls, effectively spreading costs for new system additions thin across a larger rate base, boiled down to a ploy in the sales arena for business that had not yet materialized.”
“The NEB found that “the construction and operation of the Komie North on the basis proposed by NGTL would entice volumes away from Westcoast by offering an alternative path to market with service priced well below costs.”
The report goes on to say the decision only deals with a comparatively small length of pipeline — about 110 km north of Fort Nelson, B.C. — the verdict could well have implications for the much bigger gas lines tied to Canada’s budding foray into the global liquefied natural gas industry.
Spectra and TransCanada have each proposed multibillion-dollar pipelines to connect B.C.’s remote shale gas fields to the coast, where the fuel would be frozen and shipped by tanker to energy-hungry Asian utilities.
“If part of the LNG proposal is a roll-in into Nova then you may well see some of these same issues arising again,” said a person familiar with the Komie North hearing.
TransCanada has yet to fully disclose the economics of its $4-billion Coastal GasLink project or another line tied to a proposed export terminal planned by Malaysia’s Petronas.
A spokesman for the company declined to comment on implications of the Komie decision.
The $227-million addition to TransCanada’s Nova system was conceived to carry one billion cubic feet of gas per day south from the Horn River play, with the potential to expand to 1.8 bcf as needed.
In filings with the NEB, TransCanada pegged marketable natural gas in the play at a whopping 104 trillion cubic feet.
But just one shipper, the Canadian unit of Fort Worth, Texas-based Quicksilver Resources Inc. had signed on to ship a combined 300 million cubic feet of gas per day on the Komie line, beginning with 100 MMcf/d in 2015.
The NEB said those volumes were “inadequate” to support a pipeline as big as Komie, potentially exposing other shippers on the Nova system to “significant risk.”
BMO Capital Markets analyst Carl Kirst echoed that view, noting that volumes in the Horn River “weren’t there” to justify the Komie line.
“I think if we get a situation where LNG facilities hit the point of construction and definitively move forward, then those volumes (anchored presumably by their producer owners) would inevitably follow,” he added in an email.
TransCanada has billed its Nova system as essential to Canada’s LNG ambitions. The company has spent at least $700-million since early 2012 expanding the pipeline web. Another $1-billion of expansion work is planned as part of a recently disclosed contract with Petronas.
“These are enormous capital investments,” Stephen Clark, TransCanada’s senior vice-president, Canadian and Eastern U.S. gas pipelines, said in a recent interview.
“They need security of supply and a good, commercial flywheel to help backstop the risks associated with that size of capital investment, and we think the whole [Nova system] is a great asset that will help move these projects forward.”
From the Financial Post
Follow
Recent Comments