With El Paso hot on its heels with a new offshore Atlantic pipeline proposal, Maritimes & Northeast Pipeline (Maritimes) is fast collecting market requests for expansion capacity. It said last week it received nominations for 1.7 Bcf/d of new transportation capacity on the Canadian portion of its pipeline system and 1.3 Bcf/d on the U.S. portion in an open season for its proposed $380 million Phase IV expansion project.

Local distribution companies, gas-fired electric generators and third-party marketers were among those submitting substantial requests for transportation services, indicating a sizable market for natural gas reserves from eastern Canada, Maritimes said.

That sizable market has prompted rival El Paso to plan an entirely new subsea pipeline that would bypass Maritimes and run from Sable Island to New York, New Jersey and Pennsylvania (see Daily GPI, Oct. 3). According to El Paso, natural gas demand along the East Coast is expected to increase an additional 685 MMcf/d by 2005, and by another 2 Bcf/d by the end of the decade.

El Paso said its $1.6 billion Blue Atlantic Transmission System would be 750 miles long and carry up to 1 Bcf/d of gas to U.S. markets starting in the first quarter of 2005. The company plans to file an application for the project with FERC in late 2002.

E. Jay Holm, chief executive of El Paso Eastern Pipeline Group, said the “subsea configuration offers several advantages over a land-based alternative, including minimal environmental impact, significant reduction in community disturbances,” and relatively cheaper rates. He predicted the Blue Atlantic project will be able to charge tolls “substantially less” than US$1/Mcf for deliveries to New York and New Jersey, and bargain rates for deliveries to southern Nova Scotia. “The anticipated rates are significantly less than that of any known current or proposed alternative project to provide firm transportation to these regions,” he said.

However, with pipeline already in place and an open season completed, Maritimes has a firm lead in this race to add capacity. Its Phase IV project would begin service about the same time. Canadian markets have requested deliveries along the mainline and laterals to Point Tupper, Halifax and Saint John. The U.S. nominations requested deliveries of substantial volumes into Algonquin Gas Transmission Co.’s proposed HubLine interconnection in Beverly, MA. The majority of the nominations seek services beginning in the 2004 to 2006 time frame.

“The Maritimes system was designed and constructed to accommodate the anticipated development of new natural gas fields,” said Philip Knoll, president of Maritimes & Northeast Pipeline LP. “Given our ability to quickly and cost-effectively expand the system primarily through compression, we can be ready to deliver new supplies as early as 2004.” The company also expects to add some looping line in Canada for the project.

Earlier this year, Maritimes and PanCanadian Petroleum signed agreements to transport up to 400 MMcf/d of gas from PanCanadian’s Deep Panuke project, offshore Nova Scotia. The Canadian Gas Potential Committee, while refraining from projecting sizes of potential discoveries, has rated deep-water drilling which is about to begin into new geological targets offshore of Nova Scotia as an exciting revival of frontier exploration that can be expected to start showing results rapidly. The less cautious Ziff Energy Group projects reserves in the region of up to 50 Tcf.

At trade conferences and investment seminars in the region, a lively and optimistic debate has broken out over the eventual size of the Nova Scotia gas industry, with enthusiasts such as Canadian Superior president Greg Noval calling it the “next Gulf of Mexico” while more cautious veterans of bigger producers such as Shell and PanCanadian Energy stop short of the hyperbole but say truly significant growth appears to be in the offing.

To transport the PanCanadian volumes, Maritimes will invest C$590 million to expand its capacity to 1 Bcf/d, nearly doubling the existing system capacity. Maritimes will now work with the responding parties to determine the need for additional pipeline and compression facilities for the expansion. It expects to file applications with government agencies in both the United States and Canada later this year. Maritimes has set ambitious growth targets that put the pipeline’s capacity at 2 Bcf/d by 2010.

The number of projects could rise to three, however. While no other new rivals have stepped forward, another Texas outfit has been waiting in the wings with an East Coast sea-floor gas pipeline proposal since 1997. Although Tatham Offshore Inc. shelved its North Atlantic Pipeline Project after Maritimes won approval in 1998, the Houston company’s proposal has been dormant rather than dead and representatives have continued to court support in the region. The North Atlantic plan called for a C$3.2 billion (US$2 billion), 2,200-kilometer (1,375-mile) subsea grid to be built in stages, reaching northwards to exploration areas in the Gulf of St. Lawrence and on the Grand Banks of Newfoundland.

The proposal’s first stage was a C$1.2 billion (US$800 million), 700-kilometer (435-mile) sea-floor pipeline to deliver 460 MMcf/d of gas from the Sable region to Nova Scotia and the New Hampshire seaport of Kingston. Tatham likewise projected that bargain tolls could be achieved with a sea-floor pipeline: C37 cents/Mcf (US24 cents) from the Sable area to the shores of Nova Scotia and C93 cents (US60 cents) to the international boundary. Gas from the Grand Banks of Newfoundland, while still a remote prospect about 400 miles northeast of the Sable area, is an option that Canadians are keeping open. The possibility is kept alive in recommendations by an advisory panel on approval conditions for a proposed Grand Banks oil development by Husky Energy Inc. and Petro-Canada called White Rose. After summer public hearings, the panel urged the Canada-Newfoundland Offshore Petroleum Board to direct the White Rose sponsors to do delineation drilling appraising the gas reserves within months of starting oil production.

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