TC Energy Corp. is transporting record volumes of natural gas on its Canada, U.S. and Mexico pipeline systems, and expects demand growth to accelerate over the coming years, according to management.
“Never have I seen such strong prospects for North American natural gas demand growth,” CEO François Poirier said during a call to discuss the Calgary-based midstreamer’s second quarter earnings. “We are seeing natural gas demand reach record highs, and this is expected to grow by nearly 40 Bcf/d by 2035.”
Poirier said, “Based on capacity projects under various stages of development, we have line of sight to five-plus Bcf/d of next wave LNG growth that will feed exports from Canada, the U.S. and Mexico, and we are the only company to have major assets in all three markets.”
He said that in the United States, TC currently is delivering about 30% of feed gas to liquefied natural gas facilities. “In Mexico, we expect to see the first LNG cargo this month” from New Fortress Energy Inc.’s floating export terminal offshore Altamira. In Canada, meanwhile, the Coastal GasLink (CGL) natural gas pipeline “remains ready to deliver gas when called for,” said Poirier.
Demand from TC’s utility customers remains steady, while “power generation demand is expected to increase significantly, driven by wide scale electrification, coal-fired retirements as well as emerging power needs from [artificial intelligence] and data centers. As an example, we see around 300 data centers at various stages of development, 60% of which have proposed locations within 15 miles of our systems,” namely Columbia Gas Transmission LLC, which runs from New York to the Midwest and Southeast.
Data center expansion is not limited to the United States, noted TC’s Stanley Chapman, executive vice president. “In Canada, there's around 300 data centers that are in operation today,” said Chapman, who oversees the U.S. and Mexico natural gas pipelines business. “We could see that load increasing by 1 GW to 2 GW before the end of the decade.”
He added, “In Mexico, there's about 150 data centers in operation today, most notably, in the state of Queretaro. It's ranked 13th in terms of data center demand usage currently and two of our pipelines, Villa de Reyes and the Tamazunchale pipeline, serve the state of Queretaro. So there's opportunities for expansion there.”
Poirer said, “Additionally, within 15 miles” of Columbia Gas Transmission and ANR Pipeline Co., “we estimate approximately 9 GW of coal-fired generation is set to retire by 2031. From a capacity project standpoint, these drivers represent approximately an additional 5 Bcf/d of high-quality opportunity.”
Poirier highlighted that during 2Q2024, “our NGTL system in Canada, our U.S. natural gas pipelines and our Mexico pipelines all set new all-time records for receipt or delivery volume, with several daily records achieved in July.”
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The company, which reports in Canadian currency (C$1.00/US 72 cents), is on track to place about $7 billion of projects into service this year, said Poirier.
‘Very Bullish’ On Mexico
The Southeast Gateway natural gas pipeline offshore Mexico “is making exceptional progress and we anticipate completing the offshore pipeline installation in the third quarter,” said Poirier. “This critical milestone means we are on track to achieve commercial in-service by mid-2025.”
TC is developing the project in partnership with state power utility Comisión Federal de Electricidad (CFE), which would be the anchor shipper.
TC management is “very bullish on the role that Mexico is going to play in North American gas markets, both in terms of growing demand in-country, but also the potential for LNG exports from Mexico,” said Poirier. “So that will drive additional investment opportunities for us to consider.”
Under President-elect Claudia Sheinbaum, “We see a continuation of supportive policy for natural gas transmission,” said Poirier. “The President-elect has made very supportive statements publicly with respect to natural gas transmission being important to achieving their socioeconomic goals and has also made very supportive comments with respect to the project. We have continued to see excellent support from the staff at the CFE to advance all of the development aspects of the project throughout construction.”
TC generated net income of $963 million (93 cents/share) in 2Q2024, compared to a profit of $250 million (24 cents) in 2Q2023.
