Page 8 - NorthAmOil Week 39

NorthAmOil PIPELINES & TRANSPORT NorthAmOil
NextEra buying Meade Pipeline for $1.37bn
PENNSYLVANIA
INDEPENDENT power producer NextEra Energy Partners announced on September 30 that it had agreed to buy Meade Pipeline, which owns a 39.2% interest in the Central Penn Line in Pennsylvania. The deal is valued at about $1.37bn, including $90mn of future capital con- tributions up to 2022 related to potential expan- sion of the existing pipeline.
The 185-mile (298-km) Central Penn Line transports natural gas from the Marcellus shale to demand centres in the mid-Atlantic and South-eastern regions of the US. The pipeline has the capacity to carry up to 1.7bn cubic feet (48mn cubic metres) per day of gas. Transcontinental Gas Pipe Line Co. (Transco) operates the Cen- tral Penn Line as a segment of its Atlantic Sunrise project. The Central Penn pipeline is backed by a minimum 14-year contract with what NextEra describes as “an investment-grade-equivalent customer”, and 100% of the capacity on the line is contracted to nine shippers. Transco also has a lease covering a minimum of 14 years with Meade for its interest in Central Penn.
The deal will help expand NextEra’s invest- ment in long-term contracted gas pipelines,
“helping mitigate any potential resource vola- tility in the portfolio”, said NextEra’s CEO, Jim Robo, in a statement.
Meade is a private joint venture between Alt- aGas’ WGL Midstream unit, Cabot Oil & Gas, and EIF Vega Midstream. AltaGas has agreed to sell its stake in the pipeline to Meade for about CAD870mn ($656.85mn), while Cabot said it would sell its 20% stake in Meade to NextEra for about $256mn.
NextEra said the deal included an initial consideration of $1.28bn that would be funded through debt. The company noted that the expansion opportunity for the existing pipeline would result in an additional 600mn cubic feet (17 mcm) of capacity through the addition of compression infrastructure at new and existing stations.
Meade would own 40% of the expanded capacity and would receive an additional fixed- lease payment from Transco for a period of 20 years from the in-service date of mid-2022. Transco filed an application to the US Federal Energy Regulatory Commission (FERC) seeking regulatory approval for the expansion in July.™
POLICY
Alberta raises oil production limits again
ALBERTA
THE government of Alberta has once again raised provincial oil production limits. Alberta’s producers will now be allowed to raise output to 3.80mn barrels per day in November and 3.81mn bpd in December.
The curtailments have been in place since the start of this year, having been brought in by the previous New Democratic Party (NDP) gov- ernment in a bid to prop up regional oil prices, which had fallen to new lows against global benchmarks. The differential had widened to over $50 per barrel by late 2018. The manda- tory output cuts helped narrow the differential, though Canadian heavy oil is still trading at a discount of $12.50 per barrel below US crude, according to Net Energy Exchange.
The United Conservative Party (UCP), which beat the NDP in an April election to form the new government of Alberta, has extended the curtailment amid ongoing delays to pipeline projects out of the province. This has led to crit- icism from some producers, including Impe- rial Oil, though others continue to support the output restrictions. In August, Imperial’s CEO, Rich Kruger, said the company would cut its
crude-by-rail shipments because the curtailment programme had made them less profitable by narrowing the differential between local prices and those on the US Gulf Coast.
But the Alberta government has continued talks with private sector players in a bid to have them take over crude-by-rail contracts signed by the former NDP government. Alberta Pre- mier Jason Kenney has also said the province is considering incentivising companies that add rail capacity by allowing them produce more oil.
The Canada Energy Regulator (CER) reported last week that crude-by-rail exports averaged 313,000 bpd in July, up 9% on June but below the 354,000 bpd shipped by train in December 2018.
Only 15 out of over 300 Alberta oil produc- ers are affected by the curtailments, as the first 20,000 bpd a company produces are exempt and many smaller players do not meet that thresh- old. The curtailments have been eased steadily throughout the year, with the production limit increasing from 3.56mn bpd in January to 3.79mn bpd in October.™
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w w w . N E W S B A S E . c o m Week 39 01•October•2019