Pipeline company Spectra Energy is betting big on production growth from North American shales and increasing power generation demand from Florida, allocating some $5 billion over the next five years for capital investment in both areas, company officials said Tuesday.
During its first-quarter earnings call, Spectra President and CEO Greg Ebel said the company is "in discussions" with Dow Chemical, which a few weeks ago announced it had signed a memorandum of understanding with Marcellus producer Range Resources to move ethane from southwest Pennsylvania to Dow's operations in Louisiana.
Spectra has proposed its Marcellus Ethane Pipeline System, a joint-venture with El Paso Corp. The project is one of several competing to transport NGLs to the US Gulf Coast, the Midwest or Canada.
The Spectra-El Paso line would have a capacity of 60,000 b/d and come online in 2013.
Ebel said El Paso would contribute some under-utilized portions of its existing system to the project, while Spectra holds much of the rights of way for new sections of the line.
"The Gulf Coast is where you want to be taking the ethane," Ebel said. "Our project is the logical choice given that it will be easier than an entirely greenfield one.
"The key here is the expandibility of the pipe versus. some of the other options," Ebel added. "We have the ability to build out more in the Gulf Coast and that serves better than a marine solution."
One of the competing proposals --- MarkWest's Mariner project --- includes, among other things, moving ethane by boat from the Northeast to the Gulf Coast.
Ebel said the project would likely cost between $800 million and $1 billion and that a further announcement would be due "later this year." Spectra is also eying transportation opportunities tied to the range of proposed Western Canadian LNG export terminals, Ebel said.
"There are attractive opportunities for more than one export facility," Ebel said, adding Spectra is looking at a new build from its current Westcoast pipeline to the proposed Kitimat LNG terminal in British Columbia.
Ebel pegged costs of such a project at between $2 billion and $3 billion. "Those are rough numbers, but you're going through some rough terrain," Ebel said. "It is a pretty attractive opportunity for us to put some capital to work for a long period of time."
In the Eagle Ford, Spectra is equally bullish about its Sandhills project, spearheaded by DCP Midstream, a 50-50 joint venture with ConocoPhillips.
The 700-mile NGL line, that would run from west Texas to the mammoth Mont Belvieu complex outside Houston, would move supplies from the Permian Basin as well.
Ebel said discussions with producers were ongoing and an announcement is likely within the month.
The project was initially announced with a capacity of about 130,000 b/d and would enter service sometime in 2013.
Ebel said Spectra also is looking toward increased power generation growth, particularly from the burgeoning Florida market.
The company recently put into service its expansion on its Gulfstream pipeline, which he said highlighted the growing demand for natural gas-fired generation in the state.
He said there are 50 coal plants located within 30 miles of its pipeline grid, particularly in Florida, the Carolinas, Georgia and Tennessee.
"There will be a new wave of opportunities across our system whenn older coal and oil-fired plants move to natural gas," Ebel said. "We know the competition will be strong, but we will vigorously pursue those opportunities and win our fair share."
Spectra Energy on Tuesday reported first quarter net income of $350 million, up from $342 million the same time a year ago. The bump was attributed to strong performance from fee-based businesses and earnings growth from expansion projects, the company stated in a release Tuesday.
"We also benefited from a stronger Canadian dollar and favorable NGL prices.
A colder-than-normal winter in the US Northeast saw record delivered volumes on its pipeline system, Ebel said during the company's earnings call Tuesday, although the same inclement weather stymied production because of well freeze-offs, particularly in Texas and the Midcontinent region.
The freeze-offs lowered recoveries of natural gas liquids, chief financial officer Pat Reddy said on Tuesday, but the soaring prices of crude oil and NGLs "more than offset" those production losses, as well as that of depressed natural gas prices as well.
