The arrival of a new parent with deep pockets made an immediate difference to Westcoast Energy’s pipeline system in the western Canadian natural gas drilling hot spot of British Columbia. The ink was barely dry on the final agreement for the US$8 billion purchase of Westcoast by Duke Energy Corp. before the newly-appointed president of the resulting Duke Energy Gas Transmission Canada, Bob Reid, gave the green light for a C$338.4 million (US$215 million) expansion project.

The pipeline expansion will increase in the capacity of Westcoast’s mainline in B.C. by 10% to 2.1 Bcf/d. Work has accelerated so that a target of November 2003 can be met for completing the new facilities and putting them into service.

Reid said the Duke deal cured a continuing headache at Westcoast. “Over the last 10 years, we’ve had a fantastic set of opportunities that we simply didn’t have the capacity or the balance sheet to realize.”

Robert (Bobby) Evans, president of Houston-based Duke Energy Gas Transmission, said Westcoast was chosen by the same yardsticks that Duke uses to measure international opportunities everywhere. Instead of buying or building plants as one-off projects, Duke looks for asset packages in high-growth areas that it can use as launching pads for continuing, coordinated expansion of energy facilities and trading, Evans said.

As a result of the marriage with Westcoast, Duke acquired much more than the original core of Westcoast, the B.C. gas pipeline system. The dowry doubled, to 75%, Duke’s interest in Maritimes & Northeast Pipeline between Nova Scotia and the northeastern United States. It is currently proposing a C$190.8 million (US$120 million) project to raise export capacity by 400 MMcf/d or about 75%, provided rival eastern Canadian claims on the gas before the National Energy Board (NEB) do not disrupt the process.

For Duke, the Westcoast package further included a partnership with TransCanada PipeLines Ltd. in the Alaskan megaproject sponsored by Foothills Pipe Lines Ltd., a 23.6% interest in Alliance Pipeline between Fort St. John and Chicago, 30% of Vector Pipeline from Chicago to the Ontario gas trading hub at Dawn, Union Gas in southern Ontario,and 100% of Empire State Pipeline into New York State from Niagara Falls.

Duke, while describing Westcoast as “a platform for significant growth,” intends to be patient with the big prospects. The gas transmission house recognizes that project selection and the pace in the Arctic will be an agenda driven by gas producers, Evans said. While the smaller Canadian version of a northern project in the Mackenzie Valley is beginning to look like it will come before the Alaskan grand design, Duke believes both will come eventually, he said.

The company’s stand is the same on both projects: “We are going to participate,” Evans vowed. On the East Coast, Evans said Duke regards the production and pipeline system built to date as just a start on serving the continent’s top gas prize: a growth market of 50 million in the northeastern U.S., smaller virgin markets in Canada’s maritime provinces, and the first new supply basin developed in North America in two decades.

While the deal directly affected B.C., Ontario and Nova Scotia, Duke predicted its profile will steadily rise in the Canadian industry capital of Calgary as well. Evans said Duke considers its Calgary-based Canadian trading and field services operations as related growth opportunities which are bound to expand as the corporation makes its presence felt across the country.

In B.C., the expansion project is rooted in expectations of sustained strength in gas exploration and development. Allowing for variations due to market conditions, such as a 20% reduction in drilling activity expected this year, the pipeline anticipates the number of successful gas wells in northern B.C. will average 427 annually through 2015. The sustained drilling is projected to find 10.4 Tcf of marketable gas reserves in B.C., or 11% more than the total of 9.4 Tcf currently connected to the pipeline system.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.