Southern Co. weighs natural gas investment

OREANDA-NEWS. April 30, 2015. Southern Co is "in active discussions" to invest in natural gas infrastructure projects as its southeast US utilities shift from burning coal to a larger volume of gas, chief executive Tom Fanning said.

Coal's share of Southern's generation output fell to 32pc in the first quarter down from 45pc during last winter's extreme cold weather while gas output rose to 48pc from 34pc a year ago.

Southern's utilities in Georgia, Alabama, Mississippi and Florida may burn 1.9 Bcf/d (54mn m?/d) this year, up from 1.5 Bcf/day in recent years. Depending on the final impact of proposed federal regulation to reduce carbon emissions, the figure could swell to 2.3 Bcf/day, Fanning said on an earnings call today.

"That kind of demand really gives us some opportunities to pursue a variety of investments," Fanning said.

If implementation of the Environmental Protection Agency's Clean Power Plan forces Southern to replace or convert more coal-fired plants to burn gas, more infrastructure to move gas from the west side of its utility territory to the east will be required.

Southern is weighing options to link with gas pipelines moving gas from the Gulf coast or to pipeline projects from the north designed to move abundant supplies from Appalachian shale formations.

Connecting to pipelines from the north would likely be more expensive for Southern, "so can you get a basis difference in the gas between the north and a Henry Hub-looking proxy," Fanning said.

Southern's increased appetite for gas my also lead its utilities to invest in gas reserves or production.

"It is an idea that has merit and as natural gas becomes more important to us, especially given its volatility relative to other fuels," Fanning said.