COMPANY

OPERATIONS

At year-end 2012, PNG provided gas service to approximately 39,900 residential, commercial and industrial customers. The PNG-West system served approximately 20,500 customers and the Northeast system served approximately 19,400 customers.

Transmission Pipeline System

The PNG-West transmission pipeline system connects with the Spectra Energy pipeline system near Summit Lake, British Columbia and extends 587 kilometres to the west coast of British Columbia at Prince Rupert. The pipeline between Summit Lake and Terrace has been partially paralleled, or looped, with a second line to increase throughput capacity. PNG also owns and operates over 300 kilometres of lateral transmission pipelines extending into the various communities served by PNG, the most significant being dual lines extending approximately 57 kilometres into Kitimat.

Five compressor units maintain pressure on PNG’s transmission pipeline system: two located at Summit Lake and one each at Vanderhoof, Burns Lake and Telkwa. The total installed rating of the compressor units is 16,120 kilowatts (21,610 horsepower). The sustainable capacity of the transmission pipeline system, with the present compressor and looping configuration, is approximately 3 260 103m3 (115 MMcf) per day.  With the closure of the Methanex methanol/ammonia facility in Kitimat in 2005 PNG deactivated its compressor stations at Vanderhoof and Telkwa, as well as 53 miles of 10 inch pipeline and 33 miles of 6 inch pipeline.  These facilities are being maintained for potential future use.

Western System

PNG owns and operates natural gas distribution facilities to deliver gas from its pipeline system to homes and businesses in the various communities located throughout the Western system service area.  PNG’s Western system’s distribution system is comprised of approximately 1,180 kilometers of distribution pipelines. PNG currently has exclusive franchise agreements with the municipalities of Prince Rupert, Port Edward, Kitimat, Terrace, Smithers, Burns Lake, Houston, Fraser Lake and Vanderhoof, entitling it to supply and distribute natural gas within those municipalities with renewable 21-year terms. PNG also has operating agreements with the municipalities of Telkwa and Fort St. James that entitle it to install and operate gas distribution facilities in those municipalities with renewable ten-year terms.

PNG believes there is potential to significantly increase utilization on its Western system beyond the volumes proposed for the Kitimat LNG project based on the expectation there is room for, and there may be demand for, more than one LNG export project or other natural gas related projects in the PNG-West service area.

PNG’s assessment is based in part on the continuing price spread between natural gas in North America, the supply source; and Asia, the intended market. In North America, natural gas prices have been declining mainly because of technological advances used for the discovery of shale gas and other unconventional sources. This includes significant and growing reserves in Northeast British Columbia. At the same time, natural gas prices have increased in Asia due in part to the growth of Asian economies, especially China. There can be no assurance that the favourable trend will continue, or that any new LNG projects will actually be developed.

Northeast System

The PNG (N.E.) Northeast system serves the Fort St. John and Dawson Creek area through connections with the Spectra Energy pipeline system at several locations. The Northeast system also connects with a pipeline owned by Canadian Natural Resources Limited in two locations to obtain supply for the Fort St. John area and with a producer’s pipeline near Dawson Creek. The gas supply for the Tumbler Ridge service area is also obtained from Canadian Natural Resources. The entire Northeast system consists of approximately 160 kilometres of transmission lines, 1,490 kilometres of distribution lines and a gas processing plant near Tumbler Ridge with a capacity of 120 103m3 per day.

PNG (N.E.) has exclusive franchise agreements with the cities of Dawson Creek and Fort St. John and the District of Taylor for renewable 21-year terms as well as an operating agreement with the Village of Pouce Coupe. PNG(N.E.) operates its gas distribution facilities in the Tumbler Ridge area pursuant to a certificate of public convenience and necessity issued by the Commission.