Pipeline operator TC Energy sees natural gas deliveries rise as power demand booms

Canadian pipeline operator TC Energy Corp. achieved record deliveries on its natural gas pipeline systems in the first quarter, thanks to booming North American electricity demand.

The Calgary-based company said Friday its comparable earnings from its Canada, U.S. and Mexico natural gas segments amounted to $2.37 billion in the first three months of 2024, up from $2.18 billion in the same period of 2023.

The company said deliveries on its NGTL system, which transports natural gas from Alberta and northeastern B.C. to Canadian and U.S. markets, averaged 15.3 billion cubic feet per day, up 0.7 Bcf/d from the first quarter.

The NGTL system also achieved a new single-day delivery record of 17.3 Bcf/d.

In the United States, TC Energy's natural gas pipelines business saw daily average flows in the first quarter of 30 Bcf/d, up more than five per cent year-over-year.

The company's overall U.S. natural gas portfolio and specific assets, including Columbia Gas, Columbia Gulf and Great Lakes Gas Transmission, achieved all-time delivery records.

TC Energy's natural gas deliveries to U.S. power generators were up 11 per cent year-over-year, a new record for the quarter.

"Natural gas demand growth is continuing in powering the U.S. as electricity demand grows," said CEO Francois Poirier on a conference call with analysts.

"2023 was a record year for power burn across the U.S. and that strength is continuing into 2024."

According to a report earlier this year by consulting firm McKinsey & Co., natural gas is expected to play a pivotal role in the energy transition, with global demand expected to grow by between 10 and 15 per cent past 2030 before dropping as the energy transition progresses.

The growth is expected to be driven by the switching from coal to cleaner-burning natural gas, but also by increased demand for natural gas-fired power due to the electrification of buildings, transportation and heavy industry.

In the important U.S. market, natural gas demand growth has been particularly significant. According to the U.S. Energy Information Administration, 89.1 billion cubic feet per day of natural gas was consumed last year in the United States, the most on record. Since 2018, U.S. natural gas consumption has increased by an average of four per cent annually.

Driving the demand are a number of factors, including low natural gas prices, coal plant retirements and the intermittent nature of wind and solar generation for which natural gas often serves as a backup.

TC Energy also expects to see natural gas growth due to emerging data centre demand. According to McKinsey & Co., power consumption by U.S. data centres is expected to grow by 10 per cent until 2030.

"We do see a meaningful load and growth opportunity from increased demand in coming years due to data centres," said Stanley Chapman, TC Energy's chief operating officer for natural gas pipelines.

"Reliability requirements associated with data centres are also driving increased appreciation for the role that natural gas is going to play in supporting those loads as well."

TC Energy's first-quarter profit was $1.20 billion or $1.16 per share, down from $1.31 billion or $1.29 per share in the same quarter last year. Revenue for the quarter totalled $4.24 billion, up from $3.93 billion in the first quarter of 2023.

On a comparable basis, TC Energy said it earned $1.24 per share in its latest quarter, up from $1.21 per share in the same quarter last year.

During the quarter, TC Energy announced a deal to sell its Portland Natural Gas Transmission System to BlackRock through a fund managed by its diversified infrastructure business, and investment funds managed by Morgan Stanley Infrastructure Partners.

It also announced an agreement in March to sell its Prince Rupert Gas Transmission project to the Nisga'a Nation whose lands are located on the northwest coast of B.C. near the city of Terrace and its partner, Texas-based Western LNG.

TC Energy continues to work toward the spinoff of its crude oil pipeline business into a separate company, called South Bow Corp.

Shareholders are set to vote on the proposed spinoff at TC Energy's annual general meeting scheduled for June 4.