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2015 Canadian Natural Gas Pipeline Report

5

Global LNG Markets Offer Hope for Canada Natural Gas

Pipeline Projects Aimed at Supplying New Markets

Canada’s crude oil supply seems to get all the glory, but the country is also among the world’s largest natural gas producers. The International Energy Agency (IEA) reports Canada produces approximately 15 billion cubic feet per day (Bcf/d), which ranks the country third overall — or sixth, depending on the source — with Qatar and Iran also producing close to the same amount.

Natural gas accounts for about 30 percent of Canada’s overall energy needs, according to the Canadian Association
of Petroleum Producers (CAPP). Although Canada already has about 510,000 km of pipeline to deliver natural gas products to various markets, more are in the works.

Like the United States, shale gas has become a significant contributor to the country’s overall natural gas production. As a result of U.S. natural gas production increases, Canada has had to find new avenues to get its product to market, building new pipelines to better supply domestic customers, as well as to serve the export market, with Asia being the prime target.

According to a CAPP report released July 15, Canada needs to take advantage of opportunities in the global liquid natural gas (LNG) markets to avoid a decade of decline in natural gas production.

“Accessing the global LNG market can strengthen the long-term viability of Canada’s natural gas industry and backstop the significant economic benefits it creates for Canadians,” said CAPP president and CEO Tim McMillan.

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U.S. natural gas supplies are displacing western Canadian gas in the traditional markets of Central Canada, the U.S. Midwest and U.S. Northeast, the CAPP forecast shows.

Without access to global LNG markets to stimulate production of Canada’s more-than-100-year natural gas supply, production will decline steadily over the next 10 years and then remain flat at about 13 Bcf/d until the end of the current forecast period
in 2030.

NGTL-expansion-mapHowever, if Canada were able to gain a foothold in the global LNG markets, it would enable Canadian production to recover by the end of this decade. As LNG export facilities are developed, natural gas demand to fuel these plants could raise production to 17 Bcf/day
by 2030.

“Proposed LNG projects require timely political and regulatory decisions because global LNG competition is fierce and involves many well-established international suppliers,” McMillan said. “The window of opportunity for Canada’s LNG market will not stay
open forever.”
As Canadian producers seek to speed up regulatory approvals and attract billions of investment dollars to promote the country’s LNG business, new projects are in the works to build out infrastructure to transport supply to market. What follows is an overview of many of the natural gas pipeline projects currently under way or in the permitting process.

Coastal GasLink Pipeline Project

Location: British Columbia

Stakeholder(s): TransCanada Corp., Shell Canada Ltd., LNG Canada

Overview: Coastal GasLink Pipeline Ltd. proposes to build an approximately 650-km pipeline from the Dawson Creek area to the British Columbia coastline. The pipeline will transport natural gas to the proposed LNG Canada facility near Kitimat. The project, which was announced in June 2012, would involve construction with 48-in. diameter pipe, in addition to the construction and operation of up to three meter stations and one compressor station. The initial capacity would be between 2 billion cubic feet per day (Bcf/d) and 3 Bcf/d. An application for environmental certification was filed in January and is currently under review by the BC Environmental Assessment Office. Construction, pending all required regulatory and project approvals, is expected to begin in 2016.

Eastern Mainline Project

Location: Ontario
Stakeholder(s): TransCanada PipeLines Ltd.
Overview: On Oct. 30, 2014, TransCanada submitted an application to the NEB for the proposed Eastern Mainline Project, which would consist of approximately 245 km of new gas pipeline and related components and would be constructed in four sections, beginning near Markham, Ontario and finishing near the community of Iroquois, Ontario. About 195 km of the proposed 245 km pipeline would be installed adjacent to existing pipeline, railway and public highway rights of way. The application for the proposed project has been filed to enable TransCanada to continue to meet its commercial obligations following the proposed transfer of certain Canadian Mainline facilities to Energy East Pipeline Ltd. for the conversion of those facilities to crude oil from natural gas service, called an Asset Transfer, which makes up a portion of the Energy East application. The project is currently under regulatory review. Pending approval, TransCanada expects construction to begin in the second quarter 2016.

King’s North Connection Project

Location: Ontario
Stakeholder(s): TransCanada
Overview: TransCanada is proposing to construct, own and operate a new natural gas transmission pipeline in the communities of Vaughan, Brampton and Toronto, Ontario, in order to reliably serve consumers in Ontario and Eastern Canada. The King’s North Connection project will connect proposed new Enbridge Gas Distribution pipeline facilities with TransCanada’s existing natural gas transmission facilities and provide shippers with the flexibility to source growing supplies of Marcellus gas from the U.S. Northeast. This collaborative approach willreduce the number of new natural gas pipelines required in the Greater Toronto Area. On June 2, the NEB approved construction of the project, which is expected to cost approximately $220 million and is anticipated to be in-service by third quarter 2016.

Mackenzie Gas Project

Location: Northwest Territories
Stakeholder(s): TransCanada, Imperial Oil Resources, ConocoPhillips Canada, Shell Canada Ltd., ExxonMobil Canada and the Aboriginal Pipeline Group (APG).
Overview: The Mackenzie Gas Project (MGP) is a proposed 1,196-km natural gas pipeline and gas gathering system, liquids extraction, liquids pipeline and related field developments along the Mackenzie River valley of Canada’s Northwest Territories. The NEB approved the project in March 2011, but included a requirement that construction must commence by December 2015. The project proponents continue to monitor ways to move the project forward, but so far natural gas market conditions do not signal a commercially viable opportunity. The stakeholders have reduced spending on the project to a minimum, but are seeking a solution to allow project activities to be restarted in the future. If development of the project ultimately goes ahead, it would result in a pipeline being constructed from Inuvik, Norwest Territories, to the northern border of Alberta, where it would connect to TransCanada’s system.

Merrick Mainline Pipeline Project

Location: British Columbia
Stakeholder(s): NOVA Gas Transmission Ltd. (NGTL), a subsidiary of TransCanada
Overview: In response to the rapidly increasing development of natural gas production from northeastern British Columbia, NGTL is proposing to construct, own and operate an extension to its existing Groundbirch Mainline. Located in the Peace River and Caribou regional districts, the proposed Merrick Mainline will be 260-km of up to 48-in. diameter pipeline and include associated metering facilities and valve sites. The north end will connect approximately 1 km from the west end of the Groundbirch Mainline, located about 35 km west of Dawson Creek. The south end will connect near Summit Lake, about 42 km north of Prince George, British Columbia. NGTL filed a project description with NEB in June 2014 and was expected to file an application for approval in the first quarter this year, but NEB records indicate that has yet to happen. Pending approval, temporary infrastructure construction is planned to begin in the first quarter 2016, with pipeline to follow in the third quarter 2017 and an in-service date expected in the first quarter 2020.

NEXUS Gas Transmission Project

Location: Ontario
Stakeholder(s): Enbridge, Spectra Energy and DTE Energy
Overview: The proposed NEXUS Gas Transmission Project (NGT) is a joint venture among Enbridge, Spectra Energy and DTE Energy and is being developed to support the growing demand for natural gas in the upper U.S. Midwest and eastern Canadian regions. With a decline in western
Canadian natural gas supplies to these regions, the proposed NGT system is designed to transport at least 1 Bcf/d of growing supplies of Ohio Utica shale gas to the high-demand markets in Ohio, Michigan and Ontario, Canada. The proposed path for NGT will consist of a newly constructed, greenfield pipeline that will extend approximately 250 miles from receipt points in eastern Ohio to interconnects with the existing pipeline grid in southeastern Michigan. As proposed, the path will utilize both existing and expansion capacity on the interstate pipeline system owned by Vector Pipeline LP to access the Dawn Hub in Ontario and the Enbridge Tecumseh storage facility. The NGT system is targeted to be in service as early as November 2016, depending on final market demand, commitments and necessary regulatory approvals. The project must obtain regulatory authorizations from the U.S. Federal Energy Regulatory Commission (FERC)
and the NEB, as well as other Canadian agencies

Capp-graphNGTL System Expansion Project

Location: Alberta
Stakeholder(s): NGTL
Overview: NGTL filed its regulatory application for the 2017 NGTL System Expansion Project on March 31. NGTL proposes to construct and operate new gas pipeline facilities in northern Alberta as part of its existing NGTL System. The expansion would include five new and separate pipeline section loops, totaling 230 km and the addition of two compression facilities. Approximately 90 percent of the project would parallel existing linear disturbances, such as pipelines and roads. The new facilities would consist of the following: Northwest Mainline Loop – Boundary Lake Section (approx. 91 km); Northwest Mainline Loop – Bear Canyon Section (approx. 27 km); Grande Prairie Mainline Loop No. 2 – McLeod River Section (approx. 36 km); Liege Lateral Loop No. 2 – Pelican Lake Section (approx. 56 km); Kettle River Lateral Loop – Christina River Section (approx. 20 km); Alces River Compressor Station Unit Addition; and Otter lake Compressor Station Unit Addition. On May 29, the NEB determined that the application is complete to proceed to assessment and announced that it will hold a public hearing (deadline for participating was July 9).

North Montney Extension Project

Location: British Columbia
Stakeholder(s): NGTL
Overview: The proposed $1.5 billion North Montney Mainline will be a large-diameter extension from the existing Groundbirch Mainline section of the NGTL system in northeast British Columbia. The project will consist of two sections, Aitken Creek and Kahta, totaling approximately 305 km in length and will include associated metering facilities, valve sites and possible compression facilities. The project will also include an interconnection with TransCanada’s proposed Prince Rupert Gas Transmission (PRGT) project to provide natural gas supply to the proposed Pacific NorthWest LNG export facility near Prince Rupert, British Columbia. In April, the NEB issued its report recommending the federal government approve the project. Construction activities are expected to begin the third quarter 2015. NGTL expects the Aitken Creek section to be operational in the second quarter 2016, the Kahta section in the second quarter 2017 and the export delivery facilities in 2019.

Prince Rupert Gas Transmission Project

Location: British Columbia
Stakeholder(s): Progress Energy Canada Ltd., TransCanada
Overview: In January 2013, TransCanada was selected by Progress Energy to design, build, own and operate an approximately 750-km natural gas pipeline in northern British Columbia. If approved, the Prince Rupert Gas Transmission (PRGT) project will deliver natural gas from a point near the District of Hudson’s Hope to the proposed Pacific Northwest LNG facility on Lelu Island, within the District of Port Edward. A conceptual corridor (an initial draft of the pipeline route) has been created for discussion and planning purposes. Input from Aboriginal groups and stakeholders, such as landowners, local communities and government, will help shape the final route. The final route will also reflect the terrain, environment, constructability and economics of the project. The project received its Environmental Assessment Certificate in November 2014. Pacific NorthWest LNG announced a Positive Final Investment Decision (FID) for the Prince Rupert Gas Transmission project in June, with two conditions: approval of the Project Development Agreement by the B.C. Legislature (approved July 22) and a positive regulatory decision on Pacific NorthWest LNG’s environmental assessment by the government of Canada. Construction is expected to begin in 2016, with an in-service date of 2019-2020.

Spectra Energy/BG Group Natural Gas Transportation System

Location: British Columbia
Stakeholder(s): Spectra Energy, BG Group
Overview: The proposed project from northeastern British Columbia to Prince Rupert, British Columbia, would include approximately 850 km of pipeline with a capacity of up to 4.2 Bcf/d. The project will provide the required natural gas transportation capacity to meet the demands of a proposed LNG terminal on British Columbia’s coastline, in keeping with the provincial government’s Jobs Plan and its goal of establishing LNG facilities by 2020. The project also will connect with the Spectra Energy system at Station 2 (southwest of Fort St. John), a growing natural gas hub that collects supply from multiple areas of the province and other supply basins in Western Canada. The project is expected to be in service
by 2019.

Global LNG markets offer a fresh right of way for Canada’s natural gas production.

Global LNG markets offer a fresh right of way for Canada’s natural gas production.

Towerbirch Expansion Project

Location: Alberta, British Columbia
Stakeholder(s): NGTL
Overview: NGTL is proposing to construct, own and operate an extension to the NGTL System, consisting of approximately 85 km of up to 36-in. diameter pipe that will start in the county of Saddle Hills, 80 km northwest of Grande Prairie, Alberta, and end 31 km southeast of Fort St John, British Columbia, in the Peace River Regional District. NGTL filed a project description with the NEB on May 29 and is expected to submit an application in the third quarter this year. Pending approval, construction is expected to begin in the second quarter 2017, with an in-service date in the fourth quarter 2017.

Wolverine River Lateral Loop Project

Location: Alberta
Stakeholder(s): NGTL
Overview: NGTL is proposing to construct, own and operate the Wolverine River Lateral Loop (Carmon Creek Section) Pipeline, formerly known as the Carmon Creek Pipeline. The project will entail the construction of approximately 61 km of 20 in. and will include associated valve sites. If approved, the project will extend from a tie-in point at the site of the proposed Otter Lake Compressor Station to the site of the proposed Carmon Creek East Sales meter station (an independent project for which NGTL will make a separate application to the NEB), located approximately 35 km northeast of Peace River, Alberta. The NEB announced March 5 that it has recommended the project for approval. Pipeline construction is expected to begin in the fourth quarter 2015, with an in-service date in the second quarter 2016.

This is not a comprehensive list of the pipeline projects for the upcoming construction season. For updates regarding ongoing projects, refer to the Project Roundup on page 14 and published each issue.

North American Oil & Pipelines will provide a report on U.S. gas pipeline projects in the November issue. The Canadian and U.S. oil pipeline reports were published in the February and May issues, respectively.

 Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@benjaminmedia.com.

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