Here is an Oil & Gas journal interview with Gerald J. Maier, chairman and chief executive officer of TransCanada PipeLines Ltd.
OGJ question. The growth of your company has been exceptional in the past 5 years. What do you see for the next 5 years?
Maier answer. There will be continued--but manageable--growth for us. I expect a much lower rate of annual growth in demand. The market doesn't require it, and on the supply end there isn't any big overhang of supply that's pressing for a market to serve. Those two things are pretty much hand in hand. I believe the North American supply/demand balance is in closer balance than I've ever seen it.
Q. Where do you see opportunities for business expansion and development?
A. The international area will be a very important and an integral part of the future for TransCanada. The ability we and others in the industry have to provide gas transmission infrastructures and power generation exceed the opportunities available in the U.S. and Canada.
For a company our size, part of my job is to look way into the future. We concluded that we had to do some add-ons, something different in the future. Two years ago we set out to spread our wings in the international arena. We had a run at the Del Norte pipeline system in Argentina. BritGas and TransCanada were the losers in that bid. Nova Corp. and their partners outbid us. We've built on that experience since then.
Q. Which countries or areas currently offer the best prospects?
A. We try to analyze the world and set priorities. We are not scatter-shooting. As we see it, the biggest growth areas in the short and medium term are the Americas--Mexico and South America--and Asia. That's where we are putting our highest priorities.
We know there are opportunities elsewhere. Eastern Europe and Russia will come in due course. But now, the other two areas are priorities in terms of all the important factors that go into our matrix. We are thinking in terms of joint ventures. When you operate in someone else's backyard it is almost essential to have a local partner.
Q. Canada, the U.S., and Mexico recently signed the North American Free Trade Agreement. Where does Mexico fit into the picture?
A. No one really knows where Mexico fits into the North American supply/demand situation. I and my colleagues have spent time with different people in Mexico, both within Pemex and within the government. There are different views within Pemex and within the government, and some of them conflict quite dramatically. Some of this is financial, some political. I do not expect them to come down with any pronouncement on what they might do until the next election is out of the way.
My judgment is that they will continue to use their available capital where they will get the highest return. And that in my book does not tell me that they are suddenly going to put a lot of their own capital toward natural gas development. It does not exclude the possibility that they will be able to alter their laws and maybe even their constitution to allow foreign capital to assist in some of the natural gas development.
When Mexico will become a major natural gas exporter is a question you simply cannot answer today. I think they have the capability of doing it someday if they want to, but I don't expect it to happen in this decade. Mexicans are very, very clever. They know that on a BTU or any other basis they can still buy gas from the U.S. cheaper than they can sell their oil BTUS. Why would they put their money in gas development when they can get more money the other way and they don't have to do it?
I regard Mexico as a very important component in our longer term international investments. We are very close to signing a letter of alliance with a very large, strong private Mexican company. We are serious about Mexico. We are getting ourselves aligned with people, and when opportunities appear we hope to have the groundwork done to take advantage of that.
Q. Where are you now with the various pipeline projects you are involved with in the U.S.?
A. In that context, if we had not got the Iroquois project to the U.S. Northeast approved, much of the expansion on our Canadian mainline and the Great Lakes Transmission System would not have been required. Demands on Iroquois this winter were nothing short of phenomenal. There were days when it was over 800 MMcfd on a design capacity of just over 600 MMcfd.
There is a plan to have some additional compression in place on Iroquois this fall. Beyond that, we have nothing ready to go to application for Iroquois. Partners have different views on how much Iroquois should do. There are a lot of balls in the air, and it would be presumptuous of me to think I'm smart enough to know where they'll all come down.
One thing is clear. The original negatives about the U.S. Northeast market that almost killed Iroquois before it started were wrong. The market is even better than even its proponents once thought.
Q. What about your other U.S. projects?
A. On the Tuscarora in Nevada, there have been interim approvals by Nevada, but not as extensive or the type Tuscarora would have Liked. I believe Tuscarora will go ahead and will be a good outlet for
Canadian gas.
The Mayflower project in the Northeast U.S. is quite a bit further down the road than the others. It has to do with what the market will require and what shippers are willing to make a firm commitment to do. To the extent that Mayflower is subject to electrical power requirements, mainly in Massachusetts, as the economy goes and general growth goes, so Mayflower will go.
SunShine in Florida has some approvals behind it but has more to go. It is a good project, there are good fundamentals, and it will get put in place. Florida is one of the fastest growing areas of North America, and more gas will be required for power generation alone. We would like to see the timetable for SunShine met but would not be horribly surprised or disappointed if other things crop up and it is delayed by maybe a year.
Q. And that leads to where you are now on your option to purchase Pacific Gas Transmission from Pacific Gas & Electric Co.
A. We have reasonably constant contact with PG&E, not on PGT but on other issues we have in common. We exchange views and to some extent and behind the scenes we have given them our judgment on a lot of things they have to do in Canada.
Currently, they have enough other problem issues on their plate in the courts and otherwise that they are unable to deal with PGT. And we would not be willing to deal on PGT until they get the slate clean on the legal front. Their legal concerns could complicate the sale.
We're not panicking about it at all. We believe PGT would form a good and growing part of our network. It will in the long term form part of that network. Whether we do it early or late in 1994 doesn't make much difference.
Q. What part does cogeneration play in your market development?
A. It will be an important, growing part of our plans. But there are many people with ambitions in the cogeneration area. We have looked into a number of projects where the economics don't suit our pistol, don't pass our hurdle rate. That will continue.
Having said that, we still have a number of cogeneration and combined cycle power projects on the drawing boards for Canada and the U.S. I think 75% of those will see the light of day. We probably will be able to announce those within the next 12 months and a couple of projects in Ontario within 3-4 months.
Projects like these allow diversity in terms of income and smooth out the investment curve. Nipigon in Ontario, for example, is a good cash earner and a good contributor to the bottom line.
The problem with pipelines is that they come in such lumps. You're either going hell out or nothing. That's why I like these projects.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
