Westcoast Pledges to Quadruple Maritimes' Capacity

Westcoast CEO Michael Phelps said last week the company is planning to double the capacity of the Maritimes & Northeast Pipeline system to transport more than 1.2 Bcf/d in five years but expects an additional expansion to 2 Bcf/d by the end of the decade.

"We see the expansion of Maritimes and Northeast Pipeline as one of our highest capital investment priorities," Phelps said in a speech to the Halifax Chamber of Commerce in Nova Scotia last Wednesday. "We are already planning the next stage of expansion of the Maritimes and Northeast Pipeline. We were the first to build a natural gas pipeline to help unlock the energy riches offshore Nova Scotia; we want to be the pipeline that moves this second stage of natural gas supply to market."

Phelps noted the industry already has committed to spending $1 billion this decade to develop the reserves offshore Nova Scotia. Maritimes plans to transport the growing production through looping and compression projects. "This would cost something in the order of $1 billion, approximately $400 million of which would be spent in Canada," he said. "An expansion of our line would provide the quickest, most efficient way to take on the new production represented by the [Sable Offshore Energy Project] tier II and PanCanadian production." The Sable project currently produces about 540 MMcf/d.

"Expanding our pipeline will be the least intrusive option on the environment," he said, alluding to plans of other pipeline companies and producers, most notably El Paso and Marathon (see NGI, May 7), which announced plans for a feasibility study on a new pipeline from offshore Nova Scotia to New York City.

"Incremental expansion of our main line is also the least expensive option for gas shipments," said Phelps. "In the end, our increased shipments on the line actually lower the toll for all producers by a significant amount."

Phelps said the company expects to "move quickly" with its expansion plans and will "not slow down the producers ability to get natural gas to market as soon as they have received regulatory approval and built and commissioned their production systems." He expects Maritimes to have an expansion in place in time to carry PanCanadian's Deep Panuke production when it begins to flow in 2005.

"We also see the opportunity to expand again by the end of this decade to a capacity of 2 Bcf/d... That is a four-fold expansion of the existing line. This would cost a further $1 billion, much of which would be spent in the region. As soon as new natural gas supplies are available for the markets, we will have the capacity in place to carry it. That is our pledge. Our history here already shows that M&NP keeps its promises."

But Westcoast doesn't expect to focus on the mainline to the exclusion of Atlantic Canadian markets, he added. The company also intends to build new laterals to new distribution companies. It already has completed the Halifax and Saint John laterals and has taken over the Point Tupper lateral from the Sable project operators and will have it fully operational soon.

Westcoast also is looking into natural gas storage projects in the region. The closest storage facilities are in Quebec not far from Quebec City. Westcoast also plans to build power plants that use the gas transported by Maritimes as a fuel. "We are a major partner in the Bayside Power generation project near Saint John," said Phelps. "We see real possibilities in electric power generation, especially where those units are fired by natural gas close to facilities we own and where the business case is clear."

Finally, Phelps said Westcoast expects gas prices to stabilize between $3/Mcf and $4 over the next few years. "This represents a good equilibrium price - one that compensates producers for their risk and long lead times but allows natural gas to continue to be competitive with other fuels, important to consumers. If this price forecast is right, I predict that the stage will be set for a long prosperous energy ride in Nova Scotia."

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