Energy Biz - March/April 2008 - (Page 76) » INTROdUCING Spectra Energy Builds a Business ceo fowLer on chaLLenGeS ahead by marTIn roSenberG as an important fuel for electricity generation, given a spate of cancellations of proposed coal-burning generation plants. So says Fred Fowler, the president and chief executive of Spectra Energy. Spectra was formed a year ago when the leaders of Duke Energy decided to shed natural gas properties picked up several years earlier when different growth strategies reigned. Both companies have said that they are poised to profit from becoming “pure plays” in natural gas and electricity. As for Spectra’s approach to its natural gas business, Fowler says, the operative word is “building.” EnergyBiz recently interviewed Fowler. Asked if he is enjoying the challenges before him, the 62-year-old executive said, “I’m having a blast.” His comments, edited for length and style, follow. ENERGYBIZ Spectra Energy is investing $4 billion in its core businesses between 2007 and 2010. Nationally, is there enough being invested in natural gas infrastructure? FOWLEr It’s progressing pretty nicely. We’ve been through 20 pretty tough years in the engineering and construction business. They downsized a lot, and suddenly we’re in this huge building phase. We have seen a real tightness in the supply of labor. ENERGYBIZ You recently announced plans for $1.5 billion in capital expenditures in 2008. What kind of work are you engaged in? FOWLEr Some are organic growth projects that are expansion projects around our existing asset base. We also have projects that are new assets that we’re going to build. The big investment today really is in our gas transmission business. ENERGYBIZ How good is the natural gas infrastructure in the United States? Is there enough transmission? Is there enough processing? Is there enough storage? FOWLEr We have new, nonconventional gas reserves that have been discovered in recent years. As a result of higher gas prices here, it made possible going after some reserves that made no sense at $2 and $3 per million cubic feet. nAturAl gAs once AgAin looms is getting that gas either connected into the national grid or getting it relocated into the better pricing points in the national grid. The markets that we serve, the East Coast, want access to the Rockies gas. The last decade has seen a big loss of reserves on the continental shelf of the Gulf Coast. We’ve probably lost somewhere around 10 to 11 billion cubic feet a day of production out of there. The gas in the Rockies has pretty much replaced that. ENERGYBIZ When the Rockies Express pipeline is complete and gas in the Rockies can be tapped, do you see natural gas prices moderating a bit? FOWLEr Longer term – yes. But what is really critical to getting gas prices to continue to be competitive is getting more liquefied natural gas coming into this country. I don’t think the domestic gas producers in the United States and Canada are going to be able to keep up with the demand and growth in North America. ENERGYBIZ Electricity generators favored natural gas, then coal. Will natural gas once again be favored by power generators? FOWLEr They favor it right now. A lot of gas-fired generation got built in the 1990s and early 2000s. It got overbuilt. So you’ve got this existing base just sitting there, with underutilized gas facilities particularly in markets like the Northeast and the Southeast. For baseload plants, clearly coal and nuclear are probably the best way to go. But for peaking and intermediate load, gas is really much more economical because the plants cost less and they’re so much more flexible on how they can ramp up and ramp down. We’re trying to figure out what the emission regulations are going to be so people have a good feel for what the economics really are. Realistically, for any baseload generation to be built, it’s at least a decade away. For the next 10 years, this country is going to be very dependent on gas-fired generation. ENERGYBIZ What have been the main surprises since Duke Energy spun off its natural gas business at the beginning of 2007, forming Spectra Energy? FOWLEr How well things have gone. You know, doing this spin-off is a little more complicated than it really sounds. It’s somewhat like unscrambling an egg. I’ve been very pleased with how we’ve continued to execute on the big capital expansion plan that we have. One of the bigger surprises that I’ve had has been how hard it’s been for us in establishing our new identity. Where are they? The big one is in the Rockies. In addition, they are in north Texas, Oklahoma and Arkansas. They have turned out to be much bigger than anybody thought they were going to be. What’s driving a lot of the infrastructure ENERGYBIZ FOWLEr 76 E n E rgyB i z March/April 2008
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