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Statoil to sell Marcellus gas to Canada and plan pipeline to Manhattan

BY KJETIL MALKENES HOVLAND 

OSLO -- Statoil will deliver U.S. gas to Canada from the Marcellus shale gas area in Pennsylvania from Nov. 1, in a move to secure better prices.

"From Nov. 1, we are selling our Marcellus gas to Toronto instead of around the Marcellus area. In that area, prices are much higher than around the Marcellus area," Chief Financial Officer Torgrim Reitan told the Wall Street Journal.

Statoil said it is seeking more profitable markets for its U.S. natural gas, as the country' s significant production increase had pushed prices to record lows.

Statoil also said that it had lowered its expectations for growth in its U.S. shale gas production in 2013 by 25,000 boed due to low prices.

In 2010, Statoil entered into a 20-year agreement with National Fuel Gas Co. (NFG) to transport up to 3.2 Bcm of gas per year through an interstate pipeline from Ellisburg, Pennsylvania to Niagara at the U.S.-Canadian border.

"This agreement will secure access to a main interstate pipeline system and is an important move to maximize the value of Statoil' s gas produced in the Marcellus shale," said Rune Bjornson, the company' s executive vice president for natural gas, at the time.

As Canadian domestic natural gas production is declining while demand is increasing, the eastern part of Canada will need imports from the U.S., Statoil said in a 2010 press release, adding it had agreed with National Fuel Gas to reverse the flow of the pipeline.

To reach another high-priced market, Statoil is also part of a plan to build a new gas pipeline to Manhattan, which could lower gas costs there, Mr. Reitan said. According to the U.S. Energy Information Administration, the pipeline is slated to deliver gas from November 2013.

"We are planning a gas pipeline to Manhattan, coming up near Penn station, the first crossing of the Hudson River in 40 years," said Mr. Reitan. "On that side of the river, prices are completely different from the New Jersey side."

He said Chesapeake Energy, Consolidated Edison and Statoil agreed a deal with Spectra Energy in 2009 to expand the Texas Eastern Transmission pipeline from New Jersey to New York. Today, Manhattan is fueled by diesel and fuel oil, said Mr. Reitan.

"This pipeline will help our earnings and also provide much more environmentally friendly electricity on Manhattan," Reitan said.

DOW JONES NEWS WIRES

10/29/2012

 

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