Intelligence brief: Largest US coal producer in nod to gas; TransCanada to build sixth Mexico pipeline

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Natural gas has played a major role in coal's rapid fall (Image credit: US Federal Government)

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Largest US coal producer acknowledges natural gas role in own industry's fall

The largest coal company in the United States has acknowledged natural gas’ contribution to the industry pressures that caused it to file for Chapter 11 bankruptcy protection.

Peabody Energy, the fifth-largest coal producer in the world by revenue in 2014 with $6.7 billion in sales, said it filed petitions under Chapter 11 for the majority of its US assets in the United States Bankruptcy Court for the Eastern District of Missouri.

Industry pressures in recent years have included “overproduction” of domestic shale gas and ongoing regulatory challenges, it said. But it predicted US gas prices would rebound from recent lows, and that thermal coal would continue to fuel hundreds of existing coal-generating plants and “scores more” that are under construction.

The US Energy Information Administration (EIA) noted in its latest report on natural gas supply in the northeast United States that prices were kept “low and stable” by a combination of increased deliveries of liquefied natural gas into the region, a fuel-adequacy winter-reliability program, and the warmest winter on record.

Day-ahead peak period electricity prices at the Massachusetts Hub peaked at $66 per megawatt hour (MWh) this winter, down from peaks of $211/MWh during the winter of 2014-15 and $438/MWh in 2013-14. Prices in New York City peaked at $71/MWh this winter, down from highs of $223/MWh during winter 2014-15 and $519/MWh during winter 2013-14, the EIA said.

Because natural-gas generators often set the marginal price for electricity in the Northeast, wholesale electricity prices closely reflect wholesale natural gas prices, which were similarly low this winter, the EIA said. Day-ahead natural gas prices in the Boston area peaked at $7.85 per million British thermal units (MMBtu) this winter, down from peaks of $29.25/MMBtu in the winter of 2014-15 and $77.60/MMBtu in the winter of 2013-14. Prices in New York City peaked at $7.62/MMBtu this winter, down from highs of $35.37/MMBtu during winter 2014-15 and $120.75/MMBtu during winter 2013-14.

TransCanada to build sixth Mexico pipeline

TransCanada has won the rights to build and operate the Tula–Villa de Reyes pipeline in central Mexico. The contract includes an agreement with the Federal Electricity Commission to supply 886 million cubic feet per day (MMcfd).

The Canadian firm expects to invest about $550 million in the 36-inch diameter, 420-kilometre (261-mile) pipeline and anticipates an in-service date of early 2018. The pipeline will begin in Tula, located just north of Mexico City in the state of Hidalgo, and terminate in Villa de Reyes, in the state of San Luis Potosí, transporting natural gas to power generation facilities in the Central region of the country. The project will interconnect with two of TransCanada's five other Mexico pipelines – the Tamazunchale and Tuxpan-Tula pipelines, and with other transporters in the region.

Natural-gas demand in Mexico’s Central region will increase at an average annual growth rate of about 4.4% from 818 MMcfd in 2013 to 1,562 MMcfd in 2028, the Ministry of Energy forecast in its 2014 Natural Gas Prospectus. Demand is forecast to rise 3.5% per year across Mexico’s 32 states in the same period from 6,952 MMcfd to 11,595 MMcfd. Demand in Hidalgo and San Luis Potosí will grow at a faster pace than in the rest of the nation, with Hidalgo’s forecast to increase by 7.5% per year to 607MMcfd and San Luis Potosí’s by 10.9% to 825 MMcfd.