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TransCanada Untethers North Montney Mainline Construction from Stalled LNG Terminal

TransCanada Corp. moved Monday to accelerate expansion in British Columbia (BC) by breaking a pipeline project’s previous reliance on stalled liquefied natural gas (LNG) export terminal construction on the northern Pacific coast.

A new application to the National Energy Board (NEB) seeks permission to build the dormant North Montney Mainline as an addition of 1.5 Bcf/d to TransCanada’s Alberta and BC supply collection grid, Nova Gas Transmission Ltd. (NGTL).

TransCanada said the C$1.4 billion ($1 billion) addition no longer relies on delayed construction of the Asian entry in the 20-project BC LNG lineup: Pacific Northwest LNG, led by Malaysian state energy conglomerate Petronas.

NGTL has secured shipping contracts from 11 customers developing Montney Shale gas supplies in the region that the new line would serve west of the northern BC leg of the Alaska Highway, TransCanada told the NEB.

The Canadian subsidiary of Petronas, Calgary-based Progress Energy, has signed up for 700 MMcf/d. Another 785 MMcf/d of capacity has been sold to Kelt Exploration, Aitken Creek Gas, Painted Pony Petroleum Ltd., Arc Resources, Saguaro Resources, Black Swan Energy, Tourmaline Oil, Canbriam Energy and UGR Blair Creek.

TransCanada has conditional federal and provincial approvals that only permit construction of the North Montney Mainline if the Pacific Northwest LNG terminal is built. Petronas also has government approvals but embarked last fall on a “total project review” and set no deadline for an investment decision.

The new NEB application points out that BC shale deposits have emerged as a leading source of replacement as well as growth supplies for markets in Canada and the United States.

Development of the North Montney region alone is forecast to establish 85 Tcf of reserves along the way to more than quadrupling production to 3.1 Bcf/d over the next 20 years, the application says.

“NGTL expects demand for natural gas across North America to increase from 95 Bcf/d in 2016 to over 130 Bcf/d by 2030,” said the TransCanada filing.

“On average, production from existing wells in the Western Canada Sedimentary Basin is declining by 18% each year, which results in approximately 2 Bcf/d of new supply being required each year to meet existing supply and market requirements on the NGTL System. This natural decline alone is sufficient to absorb the incremental supply associated with the [North Montney] facilities.”

TransCanada’s project package includes use of “rolled-in” tolling by NGTL, a practice which is hotly contested in BC and a key subject of an inquiry that the NEB launched last Friday into the province’s gas competitive landscape. The new North Montney Mainline schedule sets target dates of early 2018 to start construction and 2019 for completion.

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