Natural gas pipeline and storage capacity must be increased by 50% or 40 bcf/day of deliverability to accommodate operating needs of new gas-fired generation, says Jim Donnell, chief executive officer of Duke Energy North America, a unit of Duke Energy Corp.
"We need tremendous increases in storage," he said, to support up to 300 Gw of new electric generating capacity. "There is no other means to meet the operational needs for fueling the merchant generation fleet."
While some may question the need to add this much generating capacity this decade, an objective analysis reveals that much of this incremental demand exists today and the majority of the balance will be needed by 2005, Donnell said Wednesday at the PowerMart conference in Houston.
Donnell said he is least concerned about the ability to add generation to serve growing demand. Over a reasonable period of time, the industry has the ability to new resources in the regions where the need is greatest, he said.
But coming up with an additional 7 tcf of gas will be a serious challenge, he said.
"Rig counts will have to ramp up, trained operating staff will have to come from somewhere," Donnell said. Producers will be forced into costlier, deeper waters in the US Gulf of Mexico and into northern and eastern Canada.
"With natural gas price levels where they are, this exploration is most likely attractive, but we simply do not see a huge move, yet," he said.
Additional pipeline and storage capacity will lead to more cost efficient pricing, Donnell said, but there appears to be little movement to build additional facilities that could make that happen. To attract the huge sums needed to expand the nation's energy infrastructure, including electric transmission systems, will require "hundreds of millions of dollars," Donnell said.
During a question and answer period, Donnell said Duke has a couple of potential coal-fired plants "on the drawing board" but has nothing "we are ready to announce in the next 2 days." Environmental considerations make coal-fired plants impractical for the foreseeable future, he explained.
Donnell said problems in California, where Duke has operations, will resolve over time.
"It's caused us some grief, but it won't materially affect our business plant," he said.
Separately, Duke Energy reported record earnings of $2.08 per share for third quarter 2000, a 73% increase over earnings per share of $1.20 in third quarter 1999.
Duke attributed the quarter's performance to growth of the company's competitive energy businesses, including Duke Energy North America.
The results include a one-time, pretax gain of $407 million, or an aftertax gain of 67�/share, from the sale of the company's interest in BellSouth Carolina PCS during the quarter.
Excluding the gain, Duke Energy earned $1.41 per share, representing an 18% increase over the prior-year quarter. Net income for the third quarter was $770 million, up from $441 million in the third quarter of 1999. Revenue rose 135% to $15.7 billion, third quarter over third quarter.