Replacing natural gas delivery capacity has grown into a C$2.1 billion (US$1.5 billion) parallel construction project to the proposed Energy East partial conversion of TransCanada Corp.'s Mainline into oil service.
The amended plan, presented to the National Energy Board (NEB), calls for 279 kilometers (167 miles) of new 36-inch diameter pipe, capable of carrying 2.6 Bcf/d across eastern Ontario from the Toronto area to Iroquois.
Compared to the original version, filed 14 months ago, forecast costs are up by C$600 million (US$432 million) or 40%. But the project responds to demand in a market that has changed radically since 2000, TransCanada said.
Known as the Eastern Mainline, the gas portion of the Canadian pipeline overhaul is sized to cover all current firm delivery requirements plus bookings from open seasons of new transportation contracts for 2016 and 2017.
The eastern demand for a gas service overhaul arises from changing patterns of trade instead of need for more of the commodity. Total consumption in the region is forecast to remain flat, rising only at about the rate of population growth. But gas distributors, buyers and marketers are expected to keep on turning towards low-cost imports of shale production from the United States, especially from the Marcellus and Utica shales in the Appalachian region.
"The growth in the Marcellus play has been so rapid and unexpected that Marcellus gas supply now saturates the local U.S. northeast market area," according to TransCanada NEB filings. "The influence of Marcellus gas supply is also being felt in Eastern Canada as Marcellus supply pushes its way northward into southern Ontario and Quebec markets."
TransCanada's market projections foresee total U.S. gas production capacity rising to 84 Bcf/d as of 2020 from the current 73 Bcf/d, up 15% in just the next five years as growing shale output more than replaces depleting conventional output.
After ballooning from zero to 15 Bcf/d over the past six years, Marcellus output alone is expected to climb into the 23 Bcf/d range in 2020. The Utica, still in early development at about 2 Bcf/d, is forecast to climb rapidly into the 9 Bcf/d range.
A third Canadian import route will be added to the northbound freeways for American gas across the St. Clair River near Sarnia and in the Niagara Falls area, predicts TransCanada. The NEB filings say the next big gas traffic reversal will be conversion of the Iroquois pipeline boundary crossing from an eastern Ontario export conduit into another route for U.S. exports into Canada.
Prospects for Canadian supply growth rely on consumption by Alberta thermal oil sands plants and especially on hopes to break into the global tanker trade in liquefied natural gas (LNG). TransCanada's forecasts anticipate a small start on Canadian LNG exports in 2019, rising to 5.4 Bcf/d as of 2025 as the long lineup of more than two dozen terminal projects begin to score successes, stimulating new pipeline construction, too.