May 9, 2022 [NATURAL GAS INTELLIGENCE] – TC Energy Corp. is preparing to expand its natural gas pipeline network to supply molecules to Sempra’s Energía Costa Azul (ECA) liquefaction project under construction on Mexico’s Pacific Coast.
On a conference call to discuss first-quarter earnings, TC’s CEO Francois Poirier highlighted the U.S. Federal Energy Regulatory Commission’s approval last month of the proposed 500 MMcf/d North Baja XPress pipeline expansion.
The existing 86-mile North Baja system starts near Ehrenberg, AZ, and ends in Ogilby, CA, on the Mexico border. North Baja delivers gas produced in West Texas and the Rocky Mountains to markets in the western United States and Mexico.
The expansion, with a projected in-service date of April 2023, entails upgrading one compressor station and two meter stations.
The first phase of ECA comprises 3.25 million metric tons/year (mmty) of liquefaction capacity, and is slated to enter operation in 2024
Poirier was joined on the call by TC’s Stanley Chapman III, president for U.S. and Mexico natural gas pipelines.
Chapman said that if Sempra sanctions a second phase of ECA, expanding its liquefaction capacity to 12 mmty from 3.25 mmty, “we can further expand our North Baja system.”
Elsewhere in Mexico, TC expects to complete construction of the 886 MMcf/d Tula-Villa de Reyes natural gas pipeline this year, management said. Completion, he added, is “subject to the successful resolution of ongoing negotiations with neighboring communities to obtain pending land access.”
LNG Exports Poised for Growth
TC now expects liquefied natural gas (LNG) exports from North America to reach 25 Bcf/d by 2030, up more than 90% from current levels, according to Poirier.
“While the world confronts a serious geopolitical shift, a transition to cleaner energy that also meets the world’s demand is still required,” Poirier said.
“North America and TC Energy will play a critical role in securing the global energy supply, while also transitioning to a lower-carbon future.”
TC connects about 25% of gas supply apportioned for U.S. LNG exports through its extensive pipeline network, according to Poirier.
“Going forward, we expect to compete for and win our fair share of the growth in the LNG market,” the CEO said. “We continue to evaluate new expansion potentials and execute our portfolio of sanctioned projects.”
So far this year, the second phase of TC’s 1.1 Bcf/d Grand Cheniere Xpress pipeline has entered service, while the 800 MMcf/d Louisiana Xpress pipeline is expected to be fully in service over the coming months. The pipelines serve Lousiana’s Calcasieu Pass and Sabine Pass LNG export facilities, respectively.
In addition, over the last several weeks, TC has obtained approval from FERC for three pipelines with combined capacity of about 1.4 Bcf/d, all of which are designed to serve LNG exports as well.
In addition to North Baja XPress, projects greenlit by the Federal Energy Regulatory Commission include the 700 MMcf/d East Lateral XPress project on TC’s Columbia Gas Transmission system, which would support the proposed second phase of Venture Global Inc.’s Plaquemines liquefaction terminal.
The 200 MMcf/d Alberta XPress project is designed to deliver gas to Cheniere Energy Inc.’s Sabine Pass LNG facility.
These projects are “just a start,” Poirier said. “Our unparalleled pipeline network is critical to the delivery of LNG volumes today and it underlines the tremendous opportunity that we have to connect supply to the growing LNG export market.”
‘A Footprint Everywhere’
Chapman said that, “given our extensive 13-pipeline network that traverses 40 states, we have a footprint everywhere.” Depending on the sanctioning of additional liquefaction expansions, “I could see a scenario where over the next two or three years, it’s another 2 Bcf to 3 Bcf, maybe 4 Bcf/d of capacity to the LNG terminals that we’re adding on our systems.”
Chapman also discussed plans for the Permian Basin.
“I do think that there is a likelihood that you’ll see additional pipe capacity built directly to the Texas Gulf Coast LNG facilities, but not directly to the Louisiana Gulf Coast LNG facilities. Instead, you’re likely to see pipes built out of the Permian that will interconnect with our existing infrastructure in Louisiana, where we can leverage our competitive advantage and take advantage of the last mile connectivity.”
Chapman also noted growth opportunities out of the resurgent Haynesville Shale that “are not that different from the Permian…so there is a lot of overlap there.” Facilitating incremental Haynesville supply to boost LNG exports is “something that is very much at the top of our minds,” Chapman said.
Record Natural Gas Flows
The company’s first quarter results “were underpinned by solid utilization and reliability across our assets, further supported by the constructive fundamental outlook for North American energy,” management said.
Flows on TC’s U.S. natural gas pipelines averaged 30 Bcf/d, up 5% year/year, during the quarter, including an all-time daily system delivery record of nearly 35 Bcf in January.
Winter demand on the Nova Gas Transmission Line (NGTL) system in Western Canada reached 14.2 Bcf/d, its highest level since 2000.
“Now more than ever, we understand the importance of North America’s role in securing global energy supply,” said Poirier. “By working closely with our customers, we are developing long-term strategic partnerships and innovative energy solutions with the expectation of sanctioning over $5 billion of new projects annually, in line with our historic risk and return preferences…
“We are advancing our $25 billion secured capital program and expect to sanction over $5 billion of new projects per year throughout the decade, including recoverable maintenance capital.” He noted that all of TC’s secured capital projects are underpinned by long-term contracts and/or regulated business models.
Capital Revised Upward
TC is forecasting capital expenditures of $7 billion in 2022, up from an initial forecast of $6.5 billion. The upward revision “is primarily due to higher costs for the NGTL System, reflecting inflationary pressures on labor and materials, additional regulatory conditions and other factors,” management said. “We continue to work on cost mitigation strategies and assess market conditions, developments in our construction projects and the impact of Covid-19 for further changes to our overall 2022 capital program.”
The NGTL system placed about $200 million of capacity projects in service during the first quarter, management said.
TC said construction is about 63% complete on the 2.1 Bcf/d Coastal Gaslink pipeline, which is meant to supply the LNG Canada liquefaction terminal under construction in Kitimat, British Columbia.
TC’s extensive network of conventional and renewable energy assets includes a 48.4% stake in the Bruce Power nuclear plant, which supplies about 30% of Ontario’s power.
“Looking forward, we remain opportunity-rich and intend to continue expanding, extending and modernizing our existing natural gas pipeline network, advancing the Bruce Power life extension program and continuing plans to use renewable energy to power certain of our proprietary and aggregated demand,” Poirier said.
He added that, “With an emphasis on capital discipline, we continue to advance our renewable and emission-free projects under development…” These include pumped hydro storage, solar and wind power purchase agreements, the Alberta Carbon Grid and large-scale hydrogen production, Poirier said.
TC and Nikola Corp. also are evaluating a plan for a hydrogen production hub in Crossfield, Alberta, where TC operates a natural gas storage facility. If sanctioned, the proposed hub could produce 60 metric tons/day of blue hydrogen, i.e. hydrogen separated from natural gas, with the resulting carbon dioxide emissions captured. A final investment decision is expected in 2023, TC said.
TC recently announced a collaboration designed to connect renewable natural gas to a series of transportation hubs across its U.S. pipeline network.
TC reported net income of $358 million (36 cents/share) for the first quarter, versus a net loss of $1.06 billion (minus $1.11) in the same period last year.
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