Wholesale electricity generator Sterling Energy Group Inc. has acquired Kentucky-based Viking Gas Pipeline LLC and Viking Oil and Gas LLC for an undisclosed purchase price and has plans to connect the companies' natural gas production to its own pipeline system for delivery to its customers.
Sterling's purchase marks its third acquisition in the last seven months aimed at providing customers with low-cost and cleaner burning fuels, such as natural gas, which generators are increasingly turning to as more coal-fired power plants are phased-out in the face of tighter federal regulations, rising gas production and the competitive pricing tied to it (see Daily GPI, March 20).
The Viking entities had been doing business as Kentucky Blue Gas, and Sterling's acquisition will give it, among other things, 6,500 acres of leases held by production, 91 oil and gas wells in the Bowling Green, KY, area , 70 miles of natural gas pipeline and a liquid stripping plant, adding to its existing oil and gas assets.
Blue Gas' oil was stored at its well sites and transported to a nearby refinery. While that won't change, Sterling has plans to connect a natural gas gathering pipeline near Bowling Green to its subsidiary's network for delivery to one of its existing industrial customers and the public to meet demand.
Since December, Indiana-based Sterling, which was founded to locate, acquire, retrofit and operate coal-fired power facilities across the U.S., has purchased two power plants in New York and Indiana to burn wood fuel and possibly add natural gas-fired capacity. The company's latest acquisition is another in a series of moves into conventional and unconventional gas fields by wholesalers and utilities looking to better source their fuel supply as demand increases (see Daily GPI, June 25; June 17; May 16).
Last month, the U.S Environmental Protection Agency issued proposed new rules to cut carbon emissions from the power generation sector 30% below 2005 levels by 2030 (seeDaily GPI, June 2). Although the agency noted that for now it would be impossible to precisely predict how much coal, gas, nuclear or other fuel sources would be in use, it estimated that natural gas demand in the power sector could increase by 3.3 Bcf/d by 2025 (see Daily GPI, June 3).
In the meantime, coal-fired retirements have spurred additional demand for natural gas. Grid operators such as PJM Interconnection, which serves 13 states, including Kentucky and Indiana, recently indicated that it will need to replace 20,000 MW of coal-fired generation by 2016 (seeDaily GPI, May 27).