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Chesapeake Leads Anchor Shippers on Spectra Project

January 4, 2010
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Chesapeake Energy Corp., Consolidated Edison and Statoil Natural Gas have stepped up with binding precedent agreements for capacity on an expansion of Spectra Energy Corp.'s Texas Eastern Transmission and Algonquin Gas Transmission systems to deliver gas to the New Jersey and New York area. The commitments are enough for the company to proceed with the project, Spectra said.

The proposed project would be capable of transporting up to 800 MMcf/d of gas to the region and is targeted to be in service in the fourth quarter of 2013.

Specific facilities design and related costs will be finalized following an open season, which is to be announced shortly. Aspects of the proposed expansion include:

The project will utilize existing utility corridors and rights-of-way where possible, Spectra said.

"This is a project we have been pursuing for some time, which will enhance natural gas service reliability in the greater New York City area and increase consumers' access to diverse and abundant natural gas supplies," said Spectra CEO Greg Ebel. "This project aligns with our strategy to develop and construct right-sized, well timed expansion projects for our customers in the Northeast and further extends our ability to serve these key customers in New Jersey and New York, including Manhattan."

"Chesapeake's industry-leading position in the Marcellus Shale provides the perfect supply source to help energy consumers in the New York City area reduce their dependence on expensive imported oil and carbon-heavy coal," said Chesapeake CEO Aubrey K. McClendon. "With the newfound abundance of domestic natural gas through shale development unfolding in many areas of the U.S., American energy consumers can now more fully embrace the substantial economic and environmental benefits of natural gas."

This is the first major pipeline expansion in the Northeast that is designed to transport Chesapeake's rapidly expanding Marcellus Shale production and will likely be followed by other expansion projects from the Marcellus to other high-value eastern U.S. markets, said Chesapeake, which is the largest of the anchor shippers. "The New York City metropolitan area is the logical first expanded distribution delivery point for this production based on proximity to the Marcellus and the need for the New York City area to reduce its greenhouse gas emissions and improve air quality by burning less fuel oil in electricity-generating power plants and in building and home furnaces," Chesapeake said..

Along with the Haynesville Shale, Chesapeake said the Marcellus will become one of the two largest natural gas fields in the United States. Chesapeake is both the largest leasehold owner and most active driller in both Marcellus and Haynesville with more than 1.5 million and 500,000 net acres owned, respectively, and with 23 and 38 operated rigs currently drilling, respectively.

To date, Chesapeake has invested more than $1 billion in acquiring leasehold drilling rights from landowners in New York and Pennsylvania and in 2009 created more than 650 new jobs in Pennsylvania to explore for and develop Marcellus gas. Chesapeake said it expects to continue hiring Pennsylvanians but has no plans to hire in New York state until a moratorium on Marcellus drilling is lifted.

"We look forward to the day when we can reactivate our Marcellus drilling program in the Southern Tier of New York using our advanced drilling and completion technologies, which will demonstrate our ability to safely and responsibly explore for and produce natural gas in an environmentally sensitive way, just as we do every day in Pennsylvania and in many other states across the country," McClendon said.

In November Texas Eastern said it would provide at least 150 MMcf/d of firm capacity to an affiliate of Marcellus producer Range Resources Corp. to deliver Appalachian gas to markets in the Northeast as part of its Texas Eastern Appalachia to Market Expansion (TEAM) (see NGI, Nov. 23, 2009). Spectra spokesperson Toni Beck said shippers on the TEAM expansion would benefit from the added capacity into the New York City area.

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