US Power Demand Will Cause 'Daily Volatility' in Natural Gas Flows: TransCanada

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"The upcoming challenge has pushed pipeline companies to join forces with regional transportation organizations, power generators and ISOs to develop a cohesive framework for operators and services."

An increase in US power-generation demand for natural gas as coal plants retire and renewable energy sources ebb and flow, will lead to daily volatility on flows of natural gas, a TransCanada official said Tuesday.

The upcoming challenge has pushed pipeline companies to join forces with regional transportation organizations, power generators and ISOs to develop a cohesive framework for operators and services, said Lee G. Hobbs, senior vice president and general manager of TransCanada US pipelines. Hobbs made the comments at the LDC Gas Forums Rockies & West conference in Los Angeles.

"We are seeing higher intraday flow volatility," he said. "If the wind doesn't blow, you have to put on more natural gas; if the sun isn't as bright one day as it is the next, that impacts it. You've got hydro-loads that vary throughout the year, so all [of] that really points to higher flows required on natural gas pipes, plus the volatility of those flows will actually increase."

The increase in power demand will also lead to larger seasonal spikes of natural gas flows and more "dual seasonal spikes" -- with higher peaks during the summer and winter in some regions, Hobbs said.

In an effort to address the new dynamics, the Interstate Natural Gas Association of America has set up a board task force, he said. It is only the second such task force for the group's board, showing the high-level of concern about gas-electric integration. The other task force is on pipeline safety.

Hobbs also touched on other issues of supply and demand, including the possibility of exports of liquefied natural gas from North America. He said TransCanada expects about 5 Bcf/d of LNG exports from North America by 2020.

In addition, he said industrial demand for natural gas will continue to increase -- especially from fertilizer and petrochemical companies -- if the price of natural gas stays in the $4-$5/MMBtu range.

Hobbs also noted that TransCanada is "looking at" the idea of moving some of the capacity on its troubled, under-utilized Mainline pipe to oil.

"We are looking at that. Technically it is feasible...We are out there looking to see if there is actually support to do that," he said.

The Mainline is a major natural gas route across Canada which runs from the Alberta/Saskatchewan border to the Quebec/Vermont border. Last year, TransCanada filed a comprehensive toll application with Canada's National Energy Board to change the business structure and the terms and conditions of service for the mainline. The NEB conducted a series of sometimes contentious hearings about the Mainline toll issue, and a decision is expected in late 2012 or early 2013.

Platts

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