Piedmont Natural Gas, a major natural gas distributor based in Charlotte, NC, has signed a 15-year contract with Cabot Oil & Gas Corp. to purchase a “meaningful portion” of its natural gas supplies from the Marcellus Shale beginning in December 2015.

“We can’t disclose the volumes. The agreement is governed by confidentiality provisions,” Piedmont spokesman David Trust told NGI. The gas will be transported over Transcontinental Pipe Line’s (Transco) Leidy expansion project to provide service to Piedmont’s growing market, which includes more than one million customers in North and South Carolina and Tennessee.

“Cabot is one of the premier low-cost producers of shale gas in the Marcellus,” the company said in its year-end presentation to investors.

Piedmont also has signed a long-term contract with Williams Partners LP, which is affiliated with Transco, to transport the Marcellus gas from Pennsylvania to markets in the Carolinas, the company said.

The two contracts are part of the company’s continuing “supply diversification strategy” of relying less on traditional supplies from the Gulf of Mexico, which have often been subject to disruptions from hurricanes. “The agreements provide supply diversification, reliability and gas cost benefits for Piedmont’s customers across the Carolinas.”

In November, Piedmont said it would invest $180 million in Marcellus Shale-focused Constitution Pipeline, joining Williams Partners and Cabot as equity holders in the project (see NGI, Nov. 19, 2012). The pipeline “would bring low-cost gas supplies to the New England market,” Trust said. It “wouldn’t serve our markets,” but it “complements our business interests.”

“Piedmont’s equity participation in the Constitution Pipeline project [24%] aligns very well with our strategic focus on expanding our investments in complementary energy-related businesses…” said Piedmont CEO Thomas Skains.

The amount of equity natural gas that Piedmont has had to purchase to satisfy its sales gas customers’ needs has been falling in recent years, according to company data. In its fiscal year 2008, the company bought roughly 160 Bcf of supply, but that number had fallen to 132.4 Bcf in fiscal year 2012, which represents a cumulative annual growth rate of minus 4.6% per year during that span. Still, that 132.4 Bcf translates to roughly 360 MMcf/d of average daily purchases for the year, and that represents a meaningful percentage of the 62.7 Bcf of natural gas (about 682 MMcf/d) that Cabot produced in 3Q2012.

Cabot has signed on for 500 MMcf/d of capacity on the proposed Constitution pipeline, which may serve as an effective cap on the amount of gas Cabot could directly provide Piedmont on any particular day, once the sales agreement between the two parties kicks in.

An affiliate of Williams Partners would construct, operate, and maintain the 30-inch diameter, 121-mile pipeline. It is being designed to transport up to 650,000 Dth/d from established Marcellus production areas in Susquehanna County, PA. The pipeline would connect with the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, NY, and is already fully contracted with long-term commitments from Cabot and Southwestern Energy Co. The expected in-service date is March 2015.

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