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PRINT EDITION
TransCanada in talks to boost natural gas capacity
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Increasing shipments on Alberta-to-Ontario line could help producers recapture market share from U.S. rivals
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By JEFF LEWIS
  
  

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Monday, February 12, 2018 – Page B9

CALGARY -- TransCanada Corp. is mulling expansion of shipments through a major pipeline to move more natural gas from Alberta to Ontario, which could help producers snatch back market share from U.S. rivals as the prospects for overseas sales grow dimmer.

TransCanada confirmed it is discussing the potential revival of dormant capacity on its cross-country mainline system with prospective shippers, although a spokesman said it has yet to determine key details, such as what facilities or commercial arrangements may be required.

Concerns over finding markets for fast-rising, natural gas production in Western Canada have grown more acute in recent months as hopes fade for a major liquefied natural gas industry that would allow the fuel to be shipped from the British Columbia coast to destinations overseas.

Royal Dutch Shell is expected to decide later this year whether to build a $40-billion export plant in B.C., provided it can secure exemptions from federal duties on imported steel modules. Similar proposed projects have not panned out.

The Alberta-to-Ontario network historically shipped the lion's share of Western Canadian natural gas production east. But volumes have collapsed amid competition from lowcost shale gas in eastern markets, forcing TransCanada to idle segments of the line. "That infrastructure is all there and it's something we want to leverage," Tracy Robinson, TransCanada's senior vice-president and general manager of Canadian natural gas pipelines, said at a conference in Calgary last week.

The talks follow TransCanada's decision last year to shelve its Energy East pipeline, a $15.7-billion proposal to repurpose underused mainline capacity to transport more than one million barrels of crude oil a day from Alberta to eastern ports.

TransCanada is studying options for its mainline network even as bottlenecks on its regional Alberta system have made the company a target of scorn for producers and weighed heavily on wholesale natural gas prices.

Frequent outages and extensive maintenance on the company's Nova Gas Transmission Ltd. system last year pushed prices for AECO gas into negative territory on several occasions.

On Friday, it was worth $2 a gigajoule, according to the NGX Electronic Exchange.

Last fall, TransCanada secured commitments to flow 1.5 billion cubic feet of gas a day on its mainline at a discounted rate.

The company has also spent billions of dollars expanding its Alberta and B.C. system in a bid to ease constraints.

But it has faced opposition over plans to flow more gas into a system producers say is already grappling with severe pinch points. Several companies have publicly opposed its $1.4-billion North Montney project in B.C., which would add another 1.5 bcf/d of volumes. Among its biggest customers is Petronas, which last year scrapped LNG plans and is now eager to find a home for its gas.

"For us, it's very frustrating.

You don't need to be adding more gas to the north end of this system, because it can't go anywhere," said Darren Gee, chief executive of Peyto Exploration & Development Corp., which is not a mainline shipper. That could tamp any appetite for additional mainline services, even though the pipeline has idle capacity, he said.

"We can contract all we want on that pipe, but if we don't address the Alberta part, we're not going to be able to move more gas at the end of the day," Mr. Gee said.

From highs of around 6 bcf/d in 2007, deliveries on the crossCanada line have been nearly cut in half over the past decade, to around 3.5 bcf/d today.

Restoring flows to historic levels will hinge on setting shipping fees low enough so that Canadian gas can compete with shale gas in the much bigger U.S. market, said Jackie Forrest at the ARC Energy Research Institute in Calgary. TransCanada would also need to conduct extensive maintenance to revive mothballed capacity.


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