The West may have an excess of interstate natural gas pipeline capacity by the end of this year, and PG&E Gas Transmission Northwest (GTN) is retrenching on its 2003 expansion plans in the Pacific Northwest, according to Peter Lund, vice president of market development at the pipeline. In an interview with NGI, Lund said PG&E’s pipeline expansions, the new intrastate pipeline capacity additions, Kern River Gas Transmission’s 2003 expansion and multiple proposed LNG import terminals will dramatically alter the gas market in the West in the next few years.

GTN is about to complete its latest expansion of 22 miles of looping and added compression that began last summer, adding 40 MMcf/d at first and another 170 MMcf/d coming from five new compressor units that will be on line Nov. 1. The company also has hydro-tested its North Baja pipeline from the Arizona border through a portion of California and along the Northern Mexico border and the new pipeline is expected to go into service Sept. 1, adding 500 MMcf/d of export capacity, which Lund said could end up serving more California demand if proposed liquefied natural gas (LNG) import terminals are built in northern Mexico.

“It is entirely possible we could reverse-flow on that pipeline within its first five years of service,” he said. GTN and North Baja partner Sempra Energy are talking to proponents of the four or five major LNG import terminals along the Pacific Coast, and all of them, Lund said, predict there will be LNG coming into the western market before Alaskan gas is introduced.

Lund said he believes the unusual market conditions in 2000-2001 may be leading to overbuilt conditions. All of the current expansion projects (PG&E, Kern and Northwest Pipeline) emerged at what Lund called “a very extreme peak time when we had chronically low hydroelectric output and we had kind of an alignment of moons that gave us an incredible peak event.” He said competitor Kern River Gas Transmission may be overdoing its current expansion. Nevertheless, he admitted that “growth is still cruising along, and there are still indications that more gas-fired power plants are going to be required.”

There will be occasional droughts in the Pacific Northwest, he noted, putting incredible demands on natural gas. In addition, natural gas-fired electricity still “appears to be the only viable hard path to pursue these days, given environmental and permitting-time considerations.”

However, GTN is in the process of talking to customers to see if its additional expansion plans still make sense. Lund expects a determination by the end of this year. “It may well be that [a pipeline expansion] is not needed in 2003,” he said. “We may well elect to defer that expansion. We have made a commitment to keep our pipes ‘right-sized, not over-sized.'”

Lund said Rockies’ gas, from which Kern is drawing its supplies, looks “very competitive right now, but it is likely to become less competitive when Kern River’s expansion comes in because that project is so big that it is going to have a fundamental impact on the basis there.” Rocky Mountain gas supplies should make up for declines in supplies from the traditional Southwest basins, but Lund thinks reports of the demise of Canadian production have been premature because of new substantial discoveries in British Columbia and Alberta.

“One of things we continue to focus on is to make sure we have as short a lead time as possible on potential expansions to make sure we can respond to market forces and have an expansion project as close to fruition as possible.”

He also said that PG&E is shopping around for a buyer of its 50% interest in a possible 10-15 Bcf underground storage facility at Stanfield along the Washington-Oregon border.

The market’s state of constant flux will continue to keep GTN and with many other pipeline and storage companies in the West on their toes.

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