Spectra Energy and New Jersey Resources have formed a partnership to develop and operate a gas storage facility with more than 10 Bcf of working capacity to serve markets in Pennsylvania and the northeastern United States. The reservoir would be the easternmost storage on the Texas Eastern Transmission pipeline and would potentially provide a home for regasified liquefied natural gas (LNG) from Dominion Cove Point LNG.
Steckman Ridge LP, the new venture owned equally by subsidiaries of Spectra Energy and New Jersey Resources, has reached an agreement with Pennsylvania General Energy Co. LLC to acquire its depleted natural gas field in Bedford County, PA. Steckman Ridge plans to convert the field into a multi-cycle storage facility that will provide growing energy markets in the Northeast and Mid-Atlantic with supply security and flexibility, especially during the winter months.
"Natural gas storage plays an important role in balancing the complexities of supply and demand," said Martha Wyrsch, Spectra Energy Transmission CEO. "Given its capacity and strategic location, we expect Steckman Ridge to be an integral part of the Northeast's energy future."
The Steckman reservoir is better than most, Mark Fiedorek, Spectra group vice president, northeast transmission and storage, told NGI. It can be cycled two to three times and will have withdrawal capability of 300,000 MMDth/d and injection capability of 150,000 MMDth/d. Pipeline interconnects will be Spectra pipeline Texas Eastern Transmission and Dominion Gas Transmission. Both pipes have large facilities at the storage site, Fiedorek said. Some expansions may take place downstream to complement the storage development.
The majority of the capacity at the field is expected to be held by local distribution companies (LDC), gas marketers and power generators. Gas from the Gulf Coast, Appalachia and Rocky Mountain region, via Rockies Express, as well as regasified LNG from Cove Point could fill the reservoir. There will be an open season in a couple of months and a filing at the Federal Energy Regulatory Commission later this year, Fiedorek said. The project is expected to be in service in the first half of 2009. The partnership will begin preliminary engineering studies in the coming months and expects to invest about $250 million in the project.
Rick Gardner, a New Jersey Resources vice president with responsibility for the Steckman project, told NGI, that New Jersey Resources has wanted to expand its presence in the midstream sector for quite a while. "NJR is a minority owner in the Iroquois Pipeline," he said. "We have about a 5 1/2% interest, so we've looked into expanding that midstream asset. That's what put us into looking for pipeline niche opportunities as well as storage opportunities."
The Steckman reservoir is in Texas Eastern's market zone 3 (M3) and can receive regasified LNG from Cove Point over a west-bound Dominion line. "We see as more and more LNG enters the Cove Point facility and it's vaporized into the marketplace, we would project a lot of that happening in the summer period," Gardner said. "We see that as a great opportunity for storage.
"There are a few shippers at Cove Point, those who have space there. It will be interesting to see how they participate in the open season. If they don't participate in the open season there could be other LDCs that have needs along Texas Eastern as well as Dominion Transmission. It will be interesting to see how many of them may have a market view that they may end up storing vaporized gas from LNG. That will be an individual company's perception of where they think their supply will come from."
Additionally, as the above-ground LNG storage tanks at Cove Point are filled, Steckman Ridge could capture overflow gas as tankers arrive and need to offload. "So if there's not a real market for [the gas] at that time, you could see being the closest reservoir storage to that LNG facility how you could end up capturing what you might term low-cost gas because they were forced to vaporize," Gardner said.
An expansion under way at Cove point, which is scheduled for completion in the fall of 2008, would increase the sendout capacity to 1.8 Bcf/d from 1 Bcf/d, and would boost storage capacity to 14.6 Bcf from 7.8 Bcf. The project calls for the construction of two 160,000 cubic meter LNG storage tanks. Affiliate Dominion Transmission Inc. also plans to construct 161 miles of mostly 36-inch and 24-inch diameter pipeline in Maryland and Pennsylvania, and associated above-ground facilities in Virginia, Pennsylvania, New York and West Virginia (see Daily GPI, Jan. 8).
New Jersey Resources affiliates New Jersey Natural Gas and unregulated marketer NJR Energy Services are both shippers on the Texas Eastern and Dominion pipelines. Gardner said Steckman Ridge would provide an M3-to-M3 transportation haul out of storage to LDCs such as PECO, New Jersey Natural Gas, Public Service Electric & Gas, KeySpan, ConEd and Connectiv. This would give them lower variable costs than shipping gas out of storage in Texas Eastern M2, he said.
During a February talk in Houston, Wyrsch told midstream industry executives that development of gas storage facilities and longer term supply contracting by local distribution companies were necessary to ensure that North America is able to attract liquefied natural gas (LNG) in sufficient quantities (see Daily GPI, Feb. 23).
"Clearly, LNG is coming to these shores in due time, and when it does it's anticipated that it's going to come in slugs in the summertime when commodity prices are relatively depressed," Fiedorek said. "The storage is an attractive U.S. asset that brings LNG to the U.S. in the global off-peak time period."
He said that LDCs are being "very aggressive" about contracting for storage capacity. "I think in this environment everybody sees the value in storage as a great asset to manage and grow peak-day growth. We're seeing a lot of dual peak-day growth within the year, meaning summer generation needs gas supply in a big way." Storage assets that can be turned multiple times are particularly attractive in the intra-summer market and given the dual-peaking nature of the year-round market, Fiedorek said.
"A lot of these fields, it's just single turn," he said. "You fill them up all summer and you pull them out slowly all winter. This one [Steckman Ridge] can be popped a little quicker."
This is particularly beneficial now given the expected increase in dependence on natural gas for power generation due to the failure of many traditional coal-fired generation projects to move forward (see Daily GPI, March 6).
"The old fashioned storage is still kind of the LDC bread and butter," Fiedorek said. "It's a reliable backstop to the grid and it's available a little bit for that dual-peak [market], but I don't think it's there for sustained dual peaking throughout the summer, and that's why the salt projects and the good reservoir projects that can be configured for multiple cycles are going to be able to offer that summertime flexibility."
Last month, Spectra filed an application with FERC to add a fourth cavern at its Market Hub-Egan gas storage facility, which will ultimately increase working gas capacity by one-third to 32 Bcf (see Daily GPI, Feb. 22). In December, Duke Energy Gas Transmission, predecessor company to Spectra, said it planned to expand its Gulf Coast salt cavern storage facilities by more than 35 Bcf over six years. The three facilities are located at Egan in Acadia Parish, LA; Moss Bluff in Liberty County, TX; and the proposed storage facility in Copiah County, MS. When these projects are completed by 2012, the three facilities will have a total working capacity of about 70 Bcf, the company said (see Daily GPI, Dec. 7, 2006).
"Steckman Ridge will offer additional reliability to the region, helping customers manage their risks and opportunities in this volatile environment," said New Jersey Resources CEO Laurence M. Downes.
Houston-based Spectra is a gas midstream company with gathering and processing, transmission and storage and distribution assets. New Jersey Resources serves customers in New Jersey and in states from the Gulf Coast to New England and Canada. Its principal subsidiary is New Jersey Natural Gas.
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