The Rockies Express Pipeline LLC (REX) is muscling in on the growing list of contenders to carry natural gas further east by launching an open season to solicit market interest for the Northeast Express Project, a 375-mile extension that would carry gas from the original REX endpoint in Clarington, OH, to Princeton, NJ.
Subject to regulatory approval, the pipe extension could go into service in late 2010 and transport up to 1.5 million Dth/d, said joint sponsors Kinder Morgan Energy Partners (KMP), Sempra Pipelines & Storage and ConocoPhillips. Financial details were not disclosed.
The Northeast Express proposal could be in a competitive race.
In September, Spectra Energy's Texas Eastern Transmission completed an open season for its proposed Northern Bridge, which would carry the Clarington-bound gas supplies to the Philadelphia-Camden, PA, metropolitan area (see NGI, Oct. 8). An open season is being held through Nov. 16.
In August, Dominion disclosed that it had secured firm, long-term commitments to receive gas from REX and deliver it to major markets in the Northeast and Mid-Atlantic through its Dominion Hub I project (see NGI, Aug. 20). And according to Pace Global Energy Services, several are shopping projects, including one by National Fuel for "a new line to the extensive storage fields and pipeline infrastructure in western Pennsylvania" (see NGI, Oct. 29).
And last week Williams unit Transcontinental Gas Pipe Line Corp. (Transco) said its open season for a proposed 250-mile Rockies Connector Pipeline carrying 688,000 Dth/d from Clarington to Transco Station 195 in southeastern Pennsylvania generated bids exceeding project capacity from Rockies producers and the Northeast market (see related story).
And, not all the excess Rockies gas will be going east. Proposals were advanced last week for a Kern River Gas Transmission expansion of its line to Southern California to carry an additional 200,000 to 500,000 Dt/d, and for a new Bronco Pipeline to be built by Spectra Energy to carry 1 Bcf/d to Malin on the California-Oregon border (see related story).
However, REX's sponsors think their west-to-east pipe's design will give it a leg up with the competition by "capitalizing on the efficient design" of the system.
"This proposed expansion gives shippers in the Northeast natural gas markets significant and attractive opportunities to diversify their natural gas supply portfolios," said Mark Kissel, president of KMP's West Region Gas Pipelines. "The pipeline extension provides access to reliable Rocky Mountain natural gas supplies and offers customers in the Northeast that buy their gas from the Gulf Coast markets with an alternate low-cost delivery option, with access to gas storage fields in southwest Pennsylvania."
REX continues to progress on schedule, KMP stated, but "considerable interest has been expressed by existing and potential shippers, including producers, end-users, LDCs [local distribution companies] and other interstate pipelines in extending the REX pipeline from its planned terminus at Clarington, OH, eastward to a point near Princeton, NJ, and in expanding the REX pipeline between Lebanon, OH, and Clarington..." The proposed extension to Princeton "is a stand-alone project, and is not dependent on an expansion" between Lebanon and Clarington. The proposed extension from Lebanon to Clarington, coupled with the extension from Clarington to Princeton also is offered on a stand-alone basis, KMP said.
"Construction of capacity on the combined expansion/extension path would entail an expansion of planned REX facilities between Lebanon and Clarington, and the quality of expansion capacity that is proposed...may be modified independent of the extension...based on expressions of interest to this open season." Based on initial feedback from potential shippers, the Northeast Express would provide a 375-mile, 42-inch pipe. A 1 million Dth/d expansion would be added between Lebanon and Clarington.
Last week, Ultra Petroleum Corp., which has a commitment to firm capacity of 200 MMcf/d on REX, disclosed that there was a "probable likelihood of interim service starting in December 2007," according to sponsor KMP. Ultra CEO Michael Watford said his company was "aware purchases of line fill have already begun."
KMP did not confirm whether REX could ramp up earlier than scheduled. A spokesman said the project is progressing "on schedule and on time."
The first 328-mile segment of REX, which runs from the Meeker Hub in Rio Blanco County, CO, to the Wamsutter Hub in Sweetwater County, WY, and to the Cheyenne Hub in Weld County, CO, is in service and has a current capacity of 500,000 Dth/d. REX West, the segment from Cheyenne Hub to Audrain County, MO, is on schedule for an in-service date of Jan. 1. Construction on REX West is currently under way in Colorado, Wyoming, Nebraska, Kansas and Missouri. REX East, the segment from Audrain County to Clarington, is in the permitting stage and has a scheduled in-service date of Dec. 31, 2008.
During a conference call to discuss quarterly earnings last month, KMP's R. Tim Bradley, president of the company's CO2 unit, told analysts that REX's success to date has resulted on the "strength of the counterparties there [ConocoPhillips and Sempra]. We still feel very comfortable with doing financing in there, when the project is on-line. And I think you would see us doing that once it starts coming on-line on Rockies West next year, then with the follow-on in 2009 when the project's finally completed."
KMP President C. Park Shaper said all of the REX-related pipes are expected to be "investment oriented, and while there has clearly been a lot of movement in the credit market, it has been significantly less in the investment grade market. And so we've got no indication that there will be any difficulties in getting these financings done, especially with projects of stable cash flows like the ones that we have."
The REX partners are seeking nonbinding bids from interested customers for contract terms of 10 years and more with service beginning Jan. 1, 2011. Bids should be submitted by Dec. 7 to Bob Mishler at (303) 914-7762 or Bob_Mishler@kindermorgan.com. More information is available at www.rexpipeline.com or by contacting Mishler or Sempra's Jeff Hartman at (619) 696-1889 or JHartman@SempraPipelines.com.
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