Gas Market Expanding In Atlantic Canada
As Maritimes & Northeast Pipeline heads into construction, it
is starting to look more like a domestic Canadian supply system and
lose its original flavor as almost exclusively an export project.
The evolution of MNP as the delivery route for the Sable Offshore
Energy Project has set off speculation in Canada that it will
change significantly by its scheduled in-service date of Nov. 1,
Ziff Energy Group, for instance, predicts the American segment
of the line will carry "no more than 275,000 MMBtu per day" - or
62% of the original plan for 440,000 MMBtu/d - "and possibly less."
The change is being blamed partly on conditions in the United
States, where analysts point to less buoyant gas demand than
expected and an application by MNP to Washington's Federal Energy
Regulatory Commission for a postponement of plans to "prebuild" the
northern-most American facilities in Maine. But there is also
plenty of action in Canada.
North of the international border, MNP is proceeding full steam
ahead, with C$11 million (US$8 million) in contracts just awarded
for a September start on receiving pipe, stockpiling it across Nova
Scotia and New Brunswick, and clearing the Canadian right-of-way.
Introducing and spreading gas service in Atlantic Canada, the last
part of the country without it, is a cornerstone of both MNP and
SOEP. Officially, the projects remain primarily dedicated to
exports, with about four-fifths of deliverability dedicated to the
northeastern U.S. But domestic Atlantic Canadian markets are being
courted aggressively, and they are stepping forward.
The National Energy Board promptly scheduled hearings to start
Nov. 23 on a third "lateral" proposed by MNP to serve budding
Atlantic Canadian markets. The new entry raises the pipeline
project's commitments to domestic delivery facilities to C$186
million ($US133 million), counting earlier applications for
construction of spur lines to Halifax on the Atlantic coast of Nova
Scotia and St. John in southern New Brunswick.
MNP officials say marketers are working hard on piecing together
shipping contracts to support two more lateral lines on the
project's drawing boards, to reach Prince Edward Island and
northwestern New Brunswick.
MNP and SOEP remain cautious about predicting when potential
demand will be translated into firm commitments in Atlantic Canada,
saying they are prepared to respond to customers as they emerge.
But in another proceeding under way before the NEB, MNP displays
confidence that it is getting in on the ground floor of a healthy
growth market in Canada. High expectations show in a submission by
MNP to a marathon research effort by the board to prepare an
overall forecast report on Canadian energy supply and demand
MNP rates the current potential for gas use in Atlantic Canada
at 475,000 MMBtu per day - or 99% of the new pipeline's total
initial capacity. Much of the theoretically possible consumption is
expected to become reality within a reasonable span of time. By
the fifth year after MNP starts deliveries in November of 1999,
Atlantic Canadian gas demand is forecast to reach 340,000 MMBtu/d
or 125 Bcf per year. In 15 years, consumption is expected to be 430
MMBtu/d or 150 Bcf annually. The expectations are based on
customers emerging for the lateral spur lines plus regional surveys
by SNC-Lavalin Inc. and J.A. Flanagan Business & Analysis Ltd.
While MNP is putting a priority on finding industrial customers,
the pipeline also anticipates a strong "core market" of residential
and commercial consumers. MNP predicts that even though gas will
cost Atlantic Canadian consumers C$8-$9 per MMBtu (US$5.70-$6.40)
by the time it reaches their furnaces via new distribution
franchises now under review by Nova Scotia and New Brunswick
authorities, it will still be 30-60% cheaper than oil, electricity
Oil accounts for 64% of space and water heating in Nova Scotia
and 92% on Prince Edward Island. In New Brunswick, electricity has
a 62% share of the heating market, with oil coming second at 29%.
But gas is also expected to compete with oil as a fuel for power
stations. Oil accounts for 31% of industrial energy use in Nova
Scotia and 30% in New Brunswick.
Gordon Jaremko, Calgary