Thanks to shale plays and the evolving natural gas and natural gas liquids (NGL) supply-demand story, the assets of Spectra Energy Corp. and DCP Midstream LLC are poised for growth on multiple fronts, executives said last week.

In Appalachia, gas from the Marcellus Shale is pushing out in all directions. Producer demand for takeaway capacity is great, prompting Spectra to announce its Northeast Expansion Transmission (NEXT) project to serve markets in Eastern Canada and its Algonquin Incremental Market (AIM) project to meet New England demand with gas from Pennsylvania.

AIM would expand Spectra’s Algonquin Gas Transmission system, carrying gas from the Texas Eastern Transmission and Maritimes & Northeast pipelines. The NEXT project would carry Utica and Marcellus shale gas to the Dawn Hub in Ontario.

These projects, slated to enter service between 2015 and 2017, join the previously announced Texas Eastern Appalachia to Market (TEAM) 2014 project and the Ohio Pipeline Energy Network (OPEN). Combined, the four initiatives represent $2-4 billion worth of development slated for 2014-2017.

Spectra also announced that two unnamed anchor shippers had signed binding agreements for capacity on the Team 2014 expansion, which is expected to enter service during the fourth quarter of 2014. “These commitments provide sufficient market support to proceed with the development of the TEAM 2014 project,” the pipeline said, adding that a binding open season for additional capacity ends Feb. 17. The names of the shippers were not disclosed.

Late last year Spectra’s Texas Eastern announced OPEN along with project shippers American Electric Power and Chesapeake Energy Marketing Inc. (see NGI, Jan. 2). OPEN is an expansion of the Texas Eastern system to connect Marcellus and Utica shale gas supplies in Ohio to existing markets.

But the most significant project the company has is further along: the New Jersey-New York expansion project of Texas Eastern Transmission LP and Algonquin Gas Transmission LLC, Bill Yardley, Spectra group vice president for northeast transmission, told financial analysts last week.

The project is slated for New Jersey and New York, about 16 miles of new pipeline and five miles of replacement pipeline adding capacity of about 800 MMcf/d with completion by November 2013, according to Spectra’s website.

“Our New Jersey-New York [NJ-NY] Expansion continues to be the highest profile project that we have in execution at this time,” he said. “This is the most important piece of new natural gas infrastructure in execution in North America today. Northern New Jersey and Manhattan are downstream of a bottleneck that causes prices here to periodically reach four to five times that of the rest of the country.

“In addition to relieving this constraint, this strategic expansion considerably augments are already enviable market position by giving us a deeper penetration into New Jersey and, of course, a new interconnection here in Manhattan.”

While documents presented at the New York City investor conference said the NJ-NY Expansion is on track for in-service during the second half of 2013, the project is facing delays at the Federal Energy Regulatory Commission that could threaten its timeline and make the project uneconomic, according to Commission filings.

According to the project backers, “…any further delay in [the project’s] schedule will foreclose any reasonable possibility of a 2013 in-service date, may have a serious adverse impact on the construction costs, and could render the project uneconomic.”

Consolidated Edison Co. of New York (Con Edison) has signed up for capacity on the project and told FERC earlier this month that projected delays to issue the project’s environmental impact statement due to project revisions “…will cause the construction schedule to be extended and postpone the in-service date past November 2013. This will…require Con Edison to secure alternate capacity for the 2013-2014 winter season and delay until the following winter the important reliability enhancements that the project will being to New York City consumers.

“At the worst, it could cause the applicants to abandon the project as uneconomic and deny Con Edison’s customers the economic, environmental and reliability benefits of the project entirely.”

Last week Yardley said residential conversions to natural gas use in the Northeast are increasing. More significantly, gas is the fuel of choice to expand and replace aging oil- and coal-fired power generation infrastructure. In the Northeast there are about 46 coal-fired generating units within 30 miles of Spectra pipelines, representing a 10 Bcf/d demand opportunity as these plants are replaced with gas-fired units.

System expansion opportunities in the region, however, are largely producer-driven, Yardley said, with producers requiring access to a variety of markets, including Midwest power generators, the premium Northeast and New England markets as well as southeastern Canada.

Gas-fired power generation also figures prominently in Spectra’s outlook for the southeastern United States, with power generation predicted to be the No. 1 driver of demand growth in the region, according to Mark Fiedorek, Spectra group vice president for southeast transmission. He said every utility the company has spoken with is “focused on natural gas” as the answer to its needs as restrictions on power plant emissions become more strict.

Conversion from coal- and oil-fired generation will be behind more than 20,000 MW of incremental gas-fired generation demand during the 2015-2017 period, Fiedorek said. Gas-fired power demand, of course, grows the gas market’s summer peak, and Spectra has been building its gas storage position in anticipation, he said.

Spectra currently has about 65 Bcf of storage capacity in the Gulf Coast-Southeast; by 2016 it expects to have about 100 Bcf of capacity. The company’s salt cavern storage assets are the perfect complement to power generation demand thanks to their ability to offer multiple storage turns per year.

In the Gulf Coast region Fiedorek also sees opportunity for Spectra and its Texas Eastern Transmission pipeline in plans to liquefy and export domestic gas.

Export of Canadian liquefied natural gas (LNG), as contemplated by a handful of projects in British Columbia, offers the opportunity to develop pipelines from supply areas to liquefaction and export terminals, said Spectra’s Doug Bloom, president of the western transmission business. Last November Spectra executives visited four Asian countries to suss out the LNG export outlook. LNG export could also drive additional investment in upstream gathering and processing in Western Canada, he said.

In Western Canada oilsands development and new gas-fired power generation are writing other growth stories for natural gas and the infrastructure that carries it, Bloom added.

DCP Midstream is a joint venture of Spectra and ConocoPhillips and it owns the general partner of DCP Midstream Partners LP. The industry’s collective “redirection of the drillbit to liquids-rich formation” has been driving a transformation at DCP Midstream, said CEO Tom O’Connor. DCP Midstream has been in the process of repositioning itself from a gathering and processing company to a full-service midstream services provider, he said.

O’Connor described a bullish outlook for the NGL sector, particularly ethane. While over the last year or two some have warned of an approaching ethane glut, O’Connor said he sees the petrochemical industry stepping up to soak up all available U.S. ethane and then some. U.S. ethane crackers continue to capture market share from competing naphtha crackers in Europe and Asia, he said.

Petrochemical industry increases in ethane cracking capacity should serve to keep the market well balanced, at least for the near term, he said. If only half of the current announcements of new crackers result in new plants, demand will exceed ethane supply by a “significant margin.” he said.

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.