Connecting the export dots

As I’ve mentioned before in this blog the numbers for the PennEast pipeline just don’t add up. They say this pipeline is strictly to benefit PA and NJ consumers and businesses. But for the most part, we seem to have more than enough natural gas. PA is already a net-exporter of natural gas so the idea that PennEast is going to help consumers and businesses in PA fails the laugh-test.

That leaves us with NJ. But as my blog post shows, when you look at data the numbers still don’t work. This pipeline represents 200% of our existing residential consumption – yes, twice as much as we already consume. Electrical generation is going to slowly switch from coal to gas, but that only represents a modest increase in natural gas usage in NJ.

I talked about price volatility – yes, there are shortages in a few days a year. But those shortages do not justify building a 3-foot wide high pressure gas pipeline. It makes even less sense when you look at all the other pipeline projects approved or proposed.

So why are they spending billions of dollars to build these pipelines?

Connecting the Export Dots

Here’s why.

The above article details the four Liquid Natural Gas (LNG) export terminals approved by the FERC and that will be ready to go in a few years. Some details:

Cove Point LNG,  Maryland — Dominion Resources Inc

This facility will be able to export 1.8 billion cubic feet of natural gas per day. It’ll be up in 2017. PennEast will be connecting to this facility via Spectra Energy’s pipelines. PennEast will start construction in 2017 if approved.

About 1 billion cubic feet of that is approved for sending too FTA nations (nations we have a fair trade agreement with).  The rest is for nations we don’t have an FTA with.

Sabine Pass Liquefaction, Louisiana/Cheniere Energy
This will export up to 2.8 billion cubic feet of natural gas per day.

Cameron Liquefaction Project, Louisiana — Cameron LNG
This will export up to 1.7 billion cubic feet per day.

Freeport Liquefaction & Export Project, Texas — Freeport LNG Development LP
This will export up to 1.8 billion cubic feet per day.

These just cover the four approved as of today.  There are another 17 proposed that the FERC will be evaluating.  One of these will be the Downeast LNG in Maine.  So far they are conditionally approved by the DOE to export up to .460 billion cubic feet per day to FTA nations.

At the same time Creswood Midstream Partners is proposing the Marc II pipeline to connect to the PennEast pipeline;.  This will help get PennEast gas to New England markets.  And just coincidentally will have connections to DownEast LNG’s export facility.

LNG Export as a strategic direction

One of PennEast’s partners is Spectra Energy.  As a public company they’re required to file regular quarterly and annual reports with the SEC outlining their company’s financial health and their strategic vision for the future.  This is called a 10-K document.  Here’s Spectra Energy’s 10-K for the fiscal year 2014.
In it Spectra Energy outlines their business strategy.

Our Strategy. Our strategy is to create superior and sustainable value for our investors, customers, employees and communities by delivering natural gas, liquids and crude oil infrastructure to premium markets. We will grow our business through organic growth, greenfield expansions and strategic acquisitions, with a focus on safety, reliability, customer responsiveness and profitability. We intend to accomplish this by:

• Building off the strength of our asset base.
• Maximizing that base through sector leading operations and service.
• Effectively executing the projects we have secured.
Securing new growth opportunities that add value for our investors within each of our business segments.
• Expanding our value chain participation into complementary infrastructure assets.

Natural gas supply dynamics continue to rapidly change, and there is general recognition that natural gas can be an effective solution for meeting the energy needs of North America and beyond. This causes us to be optimistic about future growth opportunities. Identified opportunities include growth in natural gas-fired generation, growth in industrial markets, incremental gathering and processing requirements in western Canada, LNG exports in North America, growth related to moving new sources of gas supplies to markets and significant new liquids pipeline infrastructure.

Spectra energy comes right and out and says it – part of their growth strategy is via LNG exports.  PennEast, and the other pipelines approved or proposed, are a big part of it.

The PennEast, Transco Leidy Southeast Expansion, etc are all sized way too big for our local markets in NJ and PA.  Way, way, too big.  But they’re sized just right if you want to export gas to Europe and Asia and India.  Dove point is already 100% allocated out to companies in India and Asia.

Look at the Downeast and Dove point export rates – combined they’re capable of sending out 2.2 billion cubic feet of gas per day to countries over seas.  PennEast – as huge as it is – is only capable of doing 1 billion cubic feet of gas per day.  This is why so many pipelines are being proposed – to get shale gas to LNG export facilities.

Don’t believe the smoke screens

There will be minor benefits from the PennEast pipeline.  It’ll smooth out volatility and peak demand, so we’ll be in better shape a few days of the year.  As coal plants convert to natural gas this will help to supply them as well.

But this is a side show.  PennEast all by itself is way too big for these justifications.  These are all smoke screens and side-benefits.  The real purpose of PennEast and the other pipelines is to get the gas to the export stations.

Published by

Mike Spille

I'm a thinker, an analyzer, a synthesizer. Maybe not in that order. I live in West Amwell NJ with my wife Kristina, our two kids Day and Z, our two dogs Fern and Cinna, and three cats Ponce de Leon, Oliver, and Doolittle.

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