Houston's Spectra Energy has completed more than 70% of the New Jersey-New York natural gas pipeline expansion project, and services will launch later this year to carry critically needed supplies into one of the biggest service markets in the United States, CEO Greg Ebel told investors on Friday.
Spectra also continues to advance more than $6 billion worth of expansion projects across North America for gas, natural gas liquids (NGL) and oil, Ebel said during a quarterly earnings conference call. More than $25 billion of additional "growth opportunities" are being eyed "through the end of the decade."
"We're making significant progress toward our 2013 commitments," said Ebel. "Momentum is occurring across our system...We're making excellent progress on the New Jersey-New York project. Construction is well underway and we're actually more than 70% complete. This project is squarely in line with where we would have expected to be at this point and we're on target to bring it into service this year as originally planned."
The 20-mile expansion of Spectra's Texas Eastern Transmission and Algonquin Gas Transmission interstate pipeline systems would carry 800 MMcf/d of gas supplies to markets in northern New Jersey and New York City (see Daily GPI, May 23, 2012).
Two more big projects centered on Northeast gas supplies await sanctioning, said the CEO. The Algonquin Interstate Market (AIM) project and Renaissance "are moving closer to final decision as the demand for natural gas continues to grow in the Northeast and Southeast United States."
AIM, if approved as planned, would carry gas through Connecticut, Massachusetts and New York through an expanded Algonquin Gas Transmission system to Texas Eastern and Maritimes & Northeast pipelines. Spectra now is "negotiating terms with our customers. We expect to have executed contracts by this summer to achieve an in-service date in the second half of 2016." The Renaissance Gas Transmission Project would carry up to 1.25 Bcf/d through Texas Eastern to markets in Georgia, Alabama and Tennessee. A nonbinding open season ended March 30.
Also in the queue is a bid to expand gas service in Florida. In April, Spectra "submitted what we believe is a very competitive bid in response to Florida Power & Light's RFP [request for proposal] [see Daily GPI, Dec. 11, 2012]," said Ebel. "And per the time line outlined in the RFP, definitive agreements are expected to be signed this summer. We're optimistic about our proposal and our position and look forward to further expanding our service into the Florida market" (see Daily GPI, Jan. 17).
Spectra also is looking for more gas "project opportunities" in the Appalachian Basin through its Ohio Pipeline Energy Network (OPEN) and Nexus Gas Transmission projects, said the CEO. OPEN, to pass through Ohio's Columbiana, Carroll, Harrison, Jefferson, Belmont and Monroe counties, is in early stages; no filing has yet been made at the Federal Energy Regulatory Commission. As Spectra envisions it, OPEN would provide up to 1 Bcf/d and be ready for service in 2015. An open season is ongoing to determine customer needs.
Nexus, to traverse 250 miles of Ohio, Michigan and Ontario, would carry "at least" 1 Bcf/d; an open season was held in late 2012. Spectra is partnering on the proposal with DTE Energy and Enbridge. The projected in-service date is November 2016.
Nexus would offer "a seamless transportation path for emerging Utica Shale to Michigan, and Dawn, Ontario," said Ebel. "We're working with the market to find an effective solution. And while the ultimate in-service timing is dependent on final market demand and commitments, we now anticipate the in-service date to be in late 2016 to better accommodate those market needs."
Spectra continues to look for opportunities to serve LNG export facilities that would be sited on British Columbia's west coast, said the CEO (see Daily GPI, Sept. 11, 2012). A final investment decision on a proposed project with BG Energy is expected by "mid-decade. LNG exports are attracting a lot of attention and we'll keep you posted on our efforts to serve these markets, both in British Columbia, and of course, here on the Gulf Coast."
Still in the queue is Texas Eastern's Appalachia to Market Expansion -- TEAM -- that would move gas to various markets, including the Northeast, Midwest and southeastern local distribution companies and power markets. A signed agreement is in place, but the regulatory review has not begun, Spectra noted.
In Western Canada, the Dawson Processing Plant's second phase was completed earlier this year, Ebel noted. The final phase of the Fort Nelson North Processing Facility also was completed, offering more than 1.2 Bcf/d of processing and gathering capacity for the region. Spectra "continues to see about $7 billion in expansion growth opportunities on the horizon in this area" including liquefied natural gas opportunities.
On the oil and liquids front, Spectra's Express-Platte Pipeline System, which it acquired in March, already is contributing to Bakken and Western Canada oil growth, said Ebel. Last week Spectra dropped down the project into its master limited partnership Spectra Energy Partners. Express, an 785-mile-long, 24-inch diameter pipe, transports up to 280,000 b/d of crude produced in Western Canada at Hardisty, AB, to refiners in the U.S. Rocky Mountains. It connects with the Platte system at Casper, WY, which is able to transport up to 164,000 b/d from Casper to Guernsey, WY, and 145,000 b/d from Guernsey to Wood River, IL.
Platte is "already at full capacity," said Ebel.
Also being readied for full rollout are the Sand Hills and Southern Hills NGL pipelines, which should be "fully in service" by the middle of the year. Spectra last year bought a one-third stake in the systems from joint venture DCP Midstream LLC, a partnership with Phillips 66. Sand Hills is to carry NGLs from the Permian Basin and Eagle Ford Shale to Gulf Coast markets, while Southern Hills would provide NGL capacity from the Midcontinent to Mont Belvieu, TX.
"These assets...are great fee-based pipes that connect the Permian, the Eagle Ford and Midcontinent regions to the premium Mont Belvieu market," said Ebel. "Given only a partial year of service, we're not expecting material earnings contribution from these two pipes in 2013, but we expect to see revenues and volumes ramp up over the next several years."
Spectra's net income was $340 million (51 cents/share) in 1Q2013, nearly flat from year-ago profits of $333 million (51 cents). Operating revenue year/year also was nearly flat at $1.59 billion from $1.54 billion. Cash flow from operations totaled $582 million, up from $546 million in 1Q2012.
U.S. pipeline throughput totaled 838 trillion Btu in the latest quarter, versus 763 a year ago. In Western Canada, throughput increased to 184 trillion Btu from 177 trillion Btu, and volumes processed totaled 175 trillion Btu, down from 179 year/year. Spectra captured on average $3.34/MMBtu for its realized gas prices in the latest quarter, versus $2.74 a year earlier. Average natural gas liquids prices fell to 74 cents from $1.00, and average crude oil prices fell to $94.66/bbl from $102.84.
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