TransCanada Corporation (USA) (NYSE:TRP) has announced that it plans to spend roughly $2 billion over the next four years to expand the NOVA Gas Transmission LTD (NGTL) system in Canada.
The Canadian pipeline operator plans to enhance the NOVA gas system so that it can boost its capacity. This entails boosting its capacity to transport more fuel from Canada’s oil fields. The new investment is also not the first time that the company is spending huge sums of money in enhancing the system. In fact, it adds onto the $5.1 billion program aimed at boosting the pipeline’s capacity in Deep Basin exploration zones as well as Montney. The investment is aimed at solving problems such as weak prices faced by producers mostly due to shipping constraints.
The new expansions to help boost supply to wider reaches
The NOVA gas system is a key part of TransCanada’s infrastructure and its expansion is mainly aimed at boosting the company’s capacity to supply more effectively. The expansion will not only help in overcoming the shipping constraints but it will also allow the company to compete more effectively with American gas producers. The company hopes that the expansion will also significantly boost its revenue margins.
The NOVA gas pipeline is more than 24,000 kilometers long and it is used for shipments from Alberta to a large part of the North American market. The new expansion plans come at a time when the West Coast LNG plants have come to an indefinite halt, thus forcing companies to seek alternative sources for fast growing production.
TransCanada and other companies in the industry were hoping to load tankers with superchilled gas designated for the Asian market which has seen heavy demand. This would have allowed them to boost prices and avoid depending on the U.S as the main designation for their gas exports. Unfortunately, the construction of expensive plants has been detailed due to environmental issues.
“Our gas in the medium-term is going to go east, not west. And if you look at any of those projects that are West Coast LNG, there’s still quite a bit of uncertainty about them,” stated David Maddison, the CEO of Black Swan Energy.
TransCanada stock closed the latest trading session at $47.39.