Study projects $205.2 billion in midstream gas outlays by 2035

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, June 28 -- An average $8.2 billion/year will have to be spent by 2035 for the US and Canada to accommodate new natural gas supplies, particularly from prolific shale plays, and meet growing demand, a study commissioned by the INGAA Foundation concluded.

Some $205.2 billion will be needed for mainlines, laterals, processing, storage, compression, and gathering lines, it indicated.

“We think the numbers for capital requirements are achievable,” INGAA Foundation Pres. Donald F. Santa told reporters. “We’re very confident the pipeline and storage segment can do its part to realize North America’s natural gas potential.”

The study by ICF International updated one in October 2009 for the foundation, which is associated with the Interstate Natural Gas Association of America. Santa, also INGAA president, said the update came after less than 2 years, instead of the usual 4, because the North American gas supply situation has changed so dramatically as more gas is recovered from previously inaccessible tight shale formations.

The INGAA Foundation’s latest North America midstream outlook also looked at natural gas liquid and crude oil systems associated with gas development for the first time, he added.

It predicted by 2035, 43 bcfd of additional interregional pipeline capacity will be required, along with 35,600 miles of transmission mainline; 13,900 miles of laterals to and from power plants (where most of the new demand will occur), storage fields, and processing plants; 414,000 miles of gathering lines; 4.9 million hp more of compression capacity; another 589 bcf of working gas storage; and an additional 32.5 bcf of processing capacity.

Capital requirements
Gas capital requirements totaling $205.2 billion in the next 25 years will include $97.7 billion for mainlines, $29.8 billion for laterals, $41.7 billion for gathering lines, $9.1 billion for pipeline compression, $4.8 billion for storage fields, and $22.1 billion for additional processing capacity, the study indicated.

Associated NGL and oil capital requirements during that same period will include $14.5 billion for another 12,500 miles of NGL transmission mainline, and $31.4 billion for 19,300 miles of new oil mainline, it continued.

The study’s reference case assumes US economic growth of 2.8%/year, crude oil prices averaging about $80/bbl in real terms, US population growth averaging about 1%/year, and electric load growth averaging 1.3%/year, according to Bruce Henning, vice-president of energy regulatory affairs and market analysis within ICF’s fuels group and one of the study’s authors. The reference case also projects real gas prices will rise from $4 to $6-7/MMBtu by 2035, high enough to encourage significant gas supply development, but not so high that it limits market growth significantly, he said.

Total US and Canadian shale gas production is expected to grow from 13 bcfd in 2010 to 52 bcfd by 2035, Henning said, adding that shale play development continued during the 2008-09 recession despite relatively low gas prices. “Our Marcellus shale growth forecast assumes the number of wells will stay at their levels at the end of 2010, and no development in New York,” he told reporters.

There also will be demand for pipeline capacity to transport or process NGLs recovered from wet gas produced from many shale formations, noted Harry Vidas, an ICF upstream supply and economics specialist who wrote the report’s section on anticipated NGLs and crude oil needs. “The expenditures are going to be quite large,” he said. “Almost all of the plays have wet components which have to be removed and sold before the gas is dry enough to put into a pipeline.” He said there will be markets for propane and butane in the east, but not for ethane, which makes a pipeline or local cracking capacity likely.

Crude pipelines
Vidas said as Alaskan oil production declines, US West Coast refineries will need to get crude feedstock elsewhere and likely will turn to crude recovered from Alberta’s oil sands, shipped by pipeline to a British Columbia port, and loaded onto tankers bound for refineries in California and Washington. New crude production from the Bakken and Three Forks shale formations in North Dakota and Montana, and the Niobrara shale in the Denver, Powder River, and Green River Basins of Wyoming and Colorado also will support demand for another 5 million b/d of crude pipeline capacity by 2035, he said.

“In order to have this happen, infrastructure will have to be built to deliver all this new production to markets,” said Henning. “There are substantial requirements through the entire natural gas value chain that will demand substantial amounts of capital.”

Santa said the gas midstream segment has benefited from being able to use master limited partnerships to raise capital in the past. “This could change if the tax laws are changed,” he conceded. But he also said that midstream gas’s record of successfully lining up financing suggests investors in pipe mills and compressor manufacturers can feel secure because the demand for gas will be there.

“These are big dollar investment projects, but not that big within overall financial markets,” Henning added.

As production has moved to liquids-rich plays because of favorable market signals, pipeline system growth will be more complicated because more NGL and crude capacity will be needed, Santa observed.

The result could be a move toward a single North American gas market with more competitive pricing because there would be so much transportation, storage, and processing systems, he said. “We’re very confident the pipeline and gas storage segment can do its part in realizing North America’s gas potential in the next 25 years,” Santa said.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

EPA suggests DOS reconsider Keystone XL climate impact conclusions

02/03/2015 The US Department of State might want to reconsider its conclusions regarding potential climate impacts from the proposed Keystone XL crude oil pip...

EIA: Stable oil outlook seen despite near-term rig-count reduction

02/02/2015 According to data from Baker Hughes Inc., between the weeks ended Oct. 31, 2014, and Jan. 23, 2015, the number of active onshore drilling rigs in t...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

Hess cuts capital budget by 16% to $4.7 billion

01/27/2015 Hess Corp. has set a capital budget of $4.7 billion for 2015, down 16% from $5.6 billion spent last year. The company at the beginning of 2014 repo...

ETP, Regency to merge in $18-billion deal

01/26/2015 Energy Transfer Partners LP (ETP) and Regency Energy Partners have agreed to merge in a unit-for-unit transaction, plus a one-time cash payment to ...

EIA: Stable oil production outlook in Lower 48 despite near-term rig-count reduction

01/26/2015 According to data from Baker Hughes Inc., between the weeks ended Oct. 31, 2014, and Jan. 23, 2015, the number of active onshore drilling rigs in t...

BHI: US rig count falls for 8th straight week, down 43 units

01/23/2015

The US drilling rig count fell 43 units to settle at 1,633 rigs working during the week ended Jan. 23, Baker Hughes Inc. reported.

Kinder Morgan to acquire Hiland Partners for $3 billion

01/22/2015 Kinder Morgan Inc. (KMI) has agreed to acquire Hiland Partners from founder Harold Hamm and certain Hamm family trusts for $3 billion, including th...

Conoco’s Lance calls for repeal of US crude oil export ban

01/15/2015 The US crude export ban that was imposed in 1975 should be repealed 40 years later to ensure the US oil and gas renaissance continues, ConocoPhilli...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected