Duke Energy Gas Transmission (DEGT) is setting its sights on the growth of the liquefied natural gas (LNG) market, which offers a “clear opportunity for new infrastructure investment” that in turn, could propel DEGT’s earnings growth 3-5% on average over the next few years, said the unit’s president on Friday.

During a December investor conference call, Tom O’Connor said DEGT has several irons in the fire that will help the unit to grow over the next few years. Among other things, DEGT could spend more than $1 billion to construct new LNG terminals, expand its core Southeast market, grow storage in Saltville, Accident, Egan and Dawn, and continue a supply push from northeast British Columbia.

“As evidenced by these project opportunities, DEGT’s superior position in high growth markets and expanding supply basins, with the ability to offer geographically diverse storage, bodes well for continued expansion opportunities in the near term,” said O’Connor.

Highest on the list, however, is the opportunity in the LNG markets. “We expect LNG to play a major role in the North American gas supply outlook,” said O’Connor. “Globally, large stranded gas reserves and a continuous decline in LNG production costs favor an LNG solution. Based on available forecast data, we expect demand in our eastern markets to grow by 1.8 to 2.98% annually through 2010.”

LNG demand growth has resulted from local distribution company (LDC) load expansion, from new homes and conversions, “and while not much new electric generation is being built, we expect increased gas burn will occur at existing facilities.” Meanwhile, the Gulf Coast is expected to continue to see a gas decline of 2.3-2.6% annually, he said, “which, when combined with the demand increase, will create a supply gap of 5-7 Bcf/d.”

LNG will be critical to filling the supply gap, said O’Connor. “It is the most developed near-term new supply opportunity and appears to be where the major producers are committing their capital.”

However, importing “significant supplies” of LNG will offer a “challenge of balancing these large point source inputs with market-take patterns which are higher in winter and lower in summer. Physical storage access will be key to achieving balance and turning summer inputs into winter deliverability.”

DEGT does not believe that all of the 30 or so LNG proposals now on the board will be constructed, but O’Connor said, “it’s easy to see that most of these terminals could easily tie into our pipeline system.” With “significant opposition” to the construction of facilities in the Northeast, he noted that there is a “greater acceptance” to expand existing LNG facilities and locate new ones on the Gulf Coast and in Eastern Canada.

Beyond building connecting pipes, DEGT also sees an opportunity to build the infrastructure to integrate and optimize LNG supplies. “Customers are formulating long-term supply strategies now, and they are focused on growing winter/peak demand, and the ability to mitigate price spikes. Reliability is critical.”

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