Two pipeline expansion projects to carry Marcellus Shale gas to markets in Canada and the Northeast have garnered significant shipper support, said National Fuel Gas Supply Corp. and Empire Pipeline Inc., which comprise the pipeline and storage segment of National Fuel Gas Co.
Statoil Natural Gas LLC has signed up for 100% of the capacity on the Northern Access expansion project of National Fuel Gas Supply. And East Resources Inc. has made a binding agreement for anchor shipper capacity on Empire’s Tioga County Extension project. Negotiations with a second Tioga shipper are said to be under way.
“The market dynamics generated by the Marcellus Shale development have created a unique opportunity to move gas away from the increasingly competitive Appalachian Basin and into the newly expanding markets of Canada and the Northeast,” said National Fuel Gas Co. CEO David F. Smith. “In addition to these projects, we continue to implement the first phases of other Appalachian infrastructure projects designed to transport 190,000 Dth/d for a number of Marcellus producers, including Range Resources Corp., [National Fuel Gas subsidiary] Seneca Resources Corp. and EOG Resources Inc.”
National Fuel Gas Supply’s Northern Access expansion is designed to transport 320,000 Dth/d of Marcellus gas utilizing its existing pipelines to an existing interconnection with TransCanada Pipeline (TCPL) at the Niagara River near Lewiston, NY, for delivery to markets accessible on the TCPL system. The required project facilities include bidirectional metering at Niagara and at National Fuel Gas Supply’s interconnects with Tennessee Gas Pipeline (TGP) at East Aurora, NY, along with incremental compression at the interconnect with TGP at Ellisburg Station and at East Aurora. Initial estimates place project costs at approximately $60 million, with an expected in-service date of June 1, 2012. The open season for firm capacity, which concluded on Feb. 17, received requests for capacity of more than 1.6 million Dth/d.
The Statoil agreement, which was executed last Wednesday, includes a 20-year firm commitment for all of the available 320,000 Dth/d of service from Ellisburg for delivery to Niagara. Statoil is currently a partner in a joint venture with Chesapeake Energy Corp. for the development of Marcellus gas supplies.
Empire’s Tioga County Extension will stretch approximately 16 miles south from its existing interconnection with Millennium Pipeline at Corning, NY, into Tioga County, PA. The project will require the construction of 16 miles of new 24-inch diameter pipeline. Additionally, Empire will replace 1.3 miles of pipeline near Victor, NY, and construct an interconnection with TGP’s Line 200 in Ontario County, NY. Project costs are estimated to be $45 million, and the facilities are expected to be operational by Sept. 1, 2011. The open season for the project offered capacity of at least 300,000 Dth/d and concluded on Nov. 25.
Earlier this year East Resources executed a precedent agreement that contains a 10-year firm service commitment with Empire for 200,000 Dth/d. East’s contracted capacity allows for gas produced in both the Marcellus and Trenton-Black River formations to be delivered to an interconnect with TCPL at the Canadian border between Grand Island, NY, and Chippawa, ON. Based on this anchor shipper support, on Jan. 28 Empire began the National Environmental Policy Act pre-filing process at the Federal Energy Regulatory Commission. Empire said it expects to conclude negotiations with another shipper for an additional 150,000 Dth/d.
“These two projects are the most recent examples of our continued progress in executing on our Appalachian development strategy across multiple subsidiaries of our company,” Smith said. “From Seneca Resources Corp.’s accelerating Marcellus Shale drilling program [see NGI, Nov. 9, 2009], to our ongoing investment in National Fuel Gas Midstream Corp.’s gathering assets, to market broadening projects like these from [National Fuel Gas] Supply and Empire, our company is positioned to be a key player in the increasingly important Appalachian market.”
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