NextEra to enter gas production
In June 2014, NextEra Energy (NEE) announced it would invest in natural gas production in Florida. Natural gas is the major source of NextEra’s electricity generation in this state, contributing 67% toward the mix. So, investing in natural gas facilities will give the company access to a cheap and reliable fuel source.
Other regulated utilities with high exposure to natural gas-fired capacity are Southern Company (SO) and Entergy Corporation (ETR). Both of these companies are part of the Select Sector Utilities Select Sector SPDR Fund (XLU).
How it will benefit NextEra
Currently, NextEra purchases nearly two billion cubic feet per day of gas from suppliers at full market prices to generate electricity at its natural gas-fired power plants in Florida. Producing its own natural gas will lower NextEra’s gas procurement costs significantly.
Natural gas prices fluctuate based on changes in demand and supply. By investing in natural gas production at the source, NextEra will be able to secure gas supplies at low and stable costs. NextEra estimates total savings of $107 million over and above the infrastructure investment costs required to set up the facility.
About the project
NextEra has partnered with PetroQuest Energy (PQ) to develop 38 gas production wells in the Woodford Shale region of Oklahoma. The gas produced from these wells will be transported by pipeline networks either owned or leased by NextEra Energy.
PetroQuest will manage project operations. In exchange for its $188 million investment over the next 30 years, NextEra will receive a portion of the gas produced from these wells.