Unconventional-Gas Development Drives US Pipeline Construction Boom

Development of the US’ unconventional gas resources will require a significant expansion of pipeline infrastructure. Midstream companies are stepping up to the plate, writes Anne Feltus

Gas pipeline construction in the US is booming as midstream operators develop capacity to transport natural gas resources emerging from unconventional plays. Although construction in 2009 slowed slightly compared with 2008, when pipeline capacity grew rapidly, activity continued at a brisk pace and is expected to remain strong for several more years. At least three dozen projects are scheduled for completion this year alone.

Last year saw the completion of the Rockies Express (Rex) line, built by Kinder Morgan Energy Partners (KMEP), Sempra Pipelines & Storage and ConocoPhillips to alleviate pipeline constraints that were depressing regional wellhead prices. One of the largest gas-pipeline construction projects in North America, the $4.4bn, 1.8bn cubic feet a day (cf/d) link originates in northwest Colorado and extends 1,678 miles to eastern Ohio, linking up with more than two dozen interstate and intrastate pipelines along the way.

The first three segments went into service in January 2008, taking the pipeline as far as Audrain County, Missouri. The final phase, which began full service in late 2009, continues to the Clarington Hub in eastern Ohio, enabling Rockies producers to compete directly with Midcontinent suppliers to meet growing demand in the Midwest and eastern US. Several projects are planned to extend Rex’s reach, with plans already unveiled for the 1.5bn cf/d Northeast Express Project, to extend the pipeline 375 miles to Princeton, New Jersey, by late 2010.

In addition, Williams has proposed the 250 mile Rockies Connector, which would connect the eastern terminus of Rex to the Transco pipeline system in Pennsylvania; and National Fuel Gas is planning a 324 mile pipeline to deliver gas from Rex to Pennsylvania and New York.

Other pipelines have also been proposed to move gas out of the Rockies, including the 601 mile Sunstone Pipeline, which would take supplies to the northwest, and TransCanada’s $0.61bn, 300 mile Bison Pipeline, which would carry 477m cf/d from Wyoming’s Powder River basin to North Dakota, where it would feed into pipelines serving the Midwest. Two other pipelines have been proposed that, if completed, would move up to 1.2bn cf/d of gas from the region more than 1,000 miles to a hub in the Chicago area. El Paso’s proposed 675 mile Ruby Pipeline, scheduled for completion in early 2011, would transport up to 1.5bn cf/d of gas from Wyoming to the California-Oregon border, helping to offset reductions in Canadian imports.

As Rex began bringing gas to the US northeast to compete with supplies from the US Gulf coast and Midwest, the region has seen the development of its own gas resource: the Marcellus Shale. Primarily in Pennsylvania and New York, the Marcellus play could contain as much as 262 trillion cf of recoverable gas reserves. Pipelines are being built or planned to transport this production, as well as supplies from nearby shale-gas and coal-bed methane plays in Appalachia, to market.

Dominion Transmission intends to start construction next year on its proposed $0.6bn, 110 mile Appalachian Gateway Project, which would travel through West Virginia and Pennsylvania; and Tennessee Gas Pipeline has revealed plans for the 300 Line Expansion, which would move 340m cf/d of gas from the Marcellus Shale and Appalachia to the northeast. Enbridge has proposed a pipeline that would take Marcellus Shale gas to the Midwest.

While the development of the Marcellus and other shale deposits has been relatively recent, drilling has been under way since the late 1990s in the Barnett Shale of north Texas, one of the largest gasfields in North America. With the formation expected to produce for 20-30 more years, pipeline companies have continued to build infrastructure linking this prolific gas play to the country’s main markets. About 11% of the pipeline capacity additions in 2008 were designed to move production out of the region, says the US Department of Energy.

Continuing the trend, in early 2009, Boardwalk Pipeline Partners placed into service the 357 mile Gulf Crossing Pipeline, which carries up to 1.7bn cf/d of gas from the Barnett Shale as well as the Caney/Woodford Shales of southeastern Oklahoma to a hub in Perryville, Louisiana. In August, transportation service began on the $1.34bn, 500 mile Midcontinent Express Pipeline system, built by KMEP and Energy Transfer Partners to move shale gas to a Transco pipeline connection in Alabama.

Although successful exploitation of the US’ shale-gas plays has dampened enthusiasm for liquefied natural gas (LNG) imports (see p18), ending plans for some proposed LNG terminals, other projects are proceeding, along with pipelines to connect them to market. Construction is scheduled to start in the third quarter of 2011 on a 234 mile pipeline between the planned Jordan Cove Energy LNG terminal in Coos Bay and Malin, Oregon, connecting with various transmission and distribution lines along the way. On the east coast, the proposed 1.5bn cf/d Mid-Atlantic Express pipeline would link AES‘ planned Sparrows Point LNG import terminal, near Baltimore, Maryland, to markets in the northeast.

While not every announced pipeline project will reach completion, rapid expansion of the US’ grid is expected to continue if a report issued recently by the Interstate Natural Gas Association of America Foundation is any indication. It predicts that growth of North American natural gas supplies and market demand will require pipeline investments of $6bn-10bn a year over the next two decades.

Petroleum Economist: “Unconventional-Gas Development Drives US Pipeline Construction Boom”

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Posted by admin on May 21st, 2010. Filed under Marcellus Shale, Shale Basins. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry