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TransCanada gains critical foothold in Marcellus region with Columbia Pipeline deal

The Calgary-based company’s $13-billion acquisition of Columbia Pipeline Group gives it control of a major natural gas vein in the U.S.

Mar 17, 2016

by Jesse Snyder

TransCanada announced today it will buy Columbia Pipeline in a US$13-billion deal, which could give the Calgary-based company a critical foothold in the massive Marcellus and Utica plays in the northeastern U.S.

Houston-based Columbia, together with assets under Columbia Gas Transmission and Columbia Gas Transmission, operates a 24,000-kilometer natural gas system stretching from New York to the Gulf of Mexico. It also owns 286 billion cubic feet of natural gas storage capacity. The acquisition will expand TransCanada’s current natural gas system to an aggregate of 91,000-kilometers, and will allow the company to move gas southward from the Marcellus and Utica regions to the Gulf Coast.

“The acquisition represents a rare opportunity to invest in an extensive, competitively-positioned, growing network of regulated natural gas pipeline and storage assets in the Marcellus and Utica shale gas formations,” TransCanada CEO Russ Girling said in a statement.

The deal, which includes the assumption of US$2.8 billion in debt, comes at a time when production in the Marcellus is booming. Production in the region currently amounts to about 15Bcf/d, enough to flood North America’s natural gas market in recent years and bring prices below $2 per MMbtu. Due to the low per-well production costs in the Marcellus, that production is expected to continue. One analyst at ITG Investments predicts that as much as 24 Bcf/d of new pipeline capacity could come online in the region in the next few years, though much of that expansion could be shelved if prices remain low.

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