May 21 (Bloomberg) -- Spectra Energy Corp., the third- biggest U.S. pipeline operator by market value, may raise spending about 54 percent to $1 billion in 2010 as producers demand new infrastructure, Chief Executive Officer Greg Ebel said.

Ebel, 45, estimates gas prices will be in the range of $4 to $6 per million British thermal units in the coming years, encouraging higher production and increased demand for the fuel. Spectra spent $1.8 billion in 2008 and has averaged about $1 billion in the past three years, Ebel said. While it seemed “prudent” to bring down that amount this year, he said, he doesn’t see the average changing in the long term.

“There is a good possibility we could see in the billion dollar range again next year,” Ebel said yesterday in an interview at Spectra’s headquarters in Houston. “The need for gas infrastructure is still very strong in North America, driven by a couple of factors.”

The factors include the increasing use of natural gas in power generation and the changing dynamics of the supply brought on by output from so-called unconventional plays such as the shales.

Spectra is expanding its gathering and processing capacity to accommodate gas from the Horn River shale in British Columbia and adding storage caverns along the U.S. Gulf Coast. The company cut capital expenditures to $650 million this year from $1.8 billion in 2008 as earnings and commodity prices declined.

Spectra fell 35 cents to $14.95 in New York Stock Exchange composite trading. The stock has 10 “hold” ratings and six “buys” from analysts.

Gas-Price Outlook

Natural gas for June delivery rose 5.6 cents, or 1.4 percent, to settle at $3.97 per million Btu on the New York Mercantile Exchange yesterday. Gas has declined 29 percent this year.

“Four-to-six-dollar gas is probably the place that would be appropriate to attract producers to obviously drill and explore and produce gas, and yet not too expensive that it would drive away customers,” Ebel said.

Spectra’s net income dropped 19 percent to $298 million in the first quarter, Ebel’s first three months as CEO. While about 80 percent of earnings before interest and taxes come from charges set in contracts lasting as long as 19 years, the remainder is exposed to the volatility of oil and gas prices.

“Most of what they’re doing in the U.S. right now is more pipeline expansion and since they’re fee-based, those would help reduce their exposure on a commodity price factor,” said Brian Youngberg, an analyst at Edward Jones & Co. in Des Peres, Missouri, who rates Spectra’s shares “hold” and doesn’t own any. “In the longer term, they have some pretty significant potential projects up in Western Canada.”

Horn River

British Columbia’s Horn River region may contain 37 trillion cubic feet of natural gas, similar to the amount on Alaska’s North Slope, according to energy consultant Wood Mackenzie Ltd.

Spectra has about 18,300 miles (29,444 kilometers) of gas pipelines and 270 billion cubic feet of gas storage in the U.S. and Canada. Its Union Gas division distributes the fuel to about 1.3 million customers in Ontario, Canada. The company also operates the largest gas-storage facility in Canada.

Kinder Morgan Energy Partners LP and Enterprise Products Partners LP, both based in Houston, are the biggest U.S. pipeline operators by market value.

To contact the reporter on this story: Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net.

Last Updated: May 21, 2009 16:17 EDT