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With Expansion Algonquin Readying for More East Coast LNG

June 16, 2008
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Although imports of liquefied natural gas (LNG) to the United States have been in decline, Algonquin Gas Transmission is moving ahead with its East-to-West Expansion Project, which targets East Coast LNG imports.

Algonquin has applied to the Federal Energy Regulatory Commission (FERC) to construct its project to move regasified LNG from the eastern end of its system to northeastern markets, including New England, New York and New Jersey, by November 2009, the company said last week. One of five large-scale pipeline expansion projects Algonquin parent Spectra Energy and its subsidiaries have under way in the region, the East-to-West Project would increase Algonquin system capacity by more than 746 MMcf/d. It also would allow for reverse flow, adding supply security, more competitive pricing and increased operational flexibility, Spectra said.

Algonquin has executed firm, long-term agreements with shippers, including suppliers and local distribution companies, for the full capacity, the pipeline said. A binding open season was held in March 2007 for the project (see NGI, March 12, 2007). The $380 million project would include upgrades to three existing compressor stations in Rhode Island, Connecticut and New Jersey and replacement of less than 17 miles of existing pipeline in Massachusetts and Connecticut. New facilities would include a compressor station in Bristol County, MA, and approximately 13 miles of pipeline in Norfolk County, MA.

"The Northeast region's demand for natural gas is expected to grow by 25% or more in the next five to 10 years. We are closely focused on developing projects in the region that are sized and timed to respond to both supplier needs to move new volumes as well as market needs to gain access to new supplies," said Bill Yardley, Spectra Energy Transmission group vice president. "Our existing systems offer ready access to all major Northeast markets and can be expanded quickly, efficiently and cost-effectively to deliver new supplies from diverse sources into the region."

Yardley is undaunted by a near-term outlook for LNG imports that is less than robust. "I think that certainly the global LNG picture doesn't appear to be favorable to the U.S. right now...We've talked to a lot of these [LNG] developers and that's why we've got a couple that have attached or are attaching to the system, so we've got a little bit of [market] intelligence." When the need for some of the LNG and pipeline capacity will materialize is hard to say exactly, Yardley said. But when it does the facilities will be available, he said.

"The majority of these players are making very long-term commitments," he said. "Although it may look like the global LNG picture isn't very good right now, I think what they're banking on is that it will be OK now and will get better later. That's my sense."

Yardley said the majority of expansion capacity has been taken by LNG importers. The greatest opportunity for gas consumption growth in the Northeast is the power generation segment, he said, noting that there is an opportunity for marketers to come in and match supplies of regasified LNG and other gas supplies with power generation demand. "The aggregation, the balancing service and the attention to day-to-day detail, shipping from one plant to another, I think there would be a role there," he said.

Additionally, marketers have an opportunity to step into the Northeast market and match up local distribution companies (LDC) with regasified LNG supplies. LDCs have moved away from long-term supply contracting since the unbundling era, but LNG importers want long-term commitments in order to attract supplies. "I think the LNG importers and the local distribution companies have some middle ground to make up in contracting, Yardley said. "It seems like there's a class of customer in the LDCs that would like long-term contracting, but they've just sort of gotten out of that. And you've got the LNG importers who are saying in order to attract more LNG from abroad, we'd like to be backed by these long-term sales."

Yardley said he is not worried about competition from Rockies gas supplies moving on the Rockies Express Pipeline to Ohio and then on to the Northeast on a number of projects that have been proposed, some of which are Spectra's. With Algonquin having the ability to flow gas in either direction for the majority of its length, it can capture supplies and opportunity at either end of its system, Yardley said.

Spectra said it will have invested $1.5 billion in gas projects in the Northeast between 2007 and 2009, which represents half of the company's $3 billion capital expenditures during that timeframe. These projects are expected increase transportation capacity in the Northeast by more than 2.5 Bcf/d.

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