An Ingaa Foundation study says the gas industry could spend $7 billion on pipeline construction projects over the next 15 years to serve growing offshore natural gas production in the Gulf of Mexico.
The study said producer-owned pipelines are playing a more prominent role in the gulf, where resource estimates are in the 155 tcf range.
The analysis, by Foster Associates Inc., reported 140 companies operate 14,112 miles of pipeline in the gulf. Producers own 45% of facilities, interstate pipelines own 48%, and pipeline affiliates own 7%.
Offshore pipelines transport 77% of their throughput on behalf of marketers and producers, in contrast to onshore transport, of which 70% is on behalf of local distribution companies and end users.
Since 1990, the gas industry has spent $3.5 billion installing about 4,000 miles of new pipe. Producers own 76% of the pipelines built since 1990 but only owned 32% before then.
Gas resource development is driving pipeline construction. Some 1,512 miles of new pipe is planned, costing $1.6 billion. Major oil companies and independent producers would own 70%, pipelines 22%, and pipeline affiliates 8%.
The study said 48% of the proposed pipeline activity is off central Louisiana, while eastern Louisiana has 23%, and western Louisiana 20%. Texas, the eastern gulf, and state waters each have 3%.
The study said, "There are abundant development opportunities for resources in the gulf. Much of the gulf's potential resource base is in deepwater areas that are 200 m deep. Since the mid-1950s, the Minerals Management Service has issued 7,701 leases, covering 66 million acres. About 74% of these leases are not producing, indicating that further production increases are possible.
"Deepwater areas have the highest proportion of nonproducing leases, and the production potential is quite high compared with the other, more mature areas. Deepwater's current 11% share of production could reach more than 60%, based on the location of the potential resource base estimates."
The study said, "Producers are attracted to offshore pipeline investments for several reasons. First, they see it as a business opportunity. They can invest in pipelines and avoid paying others for transportation services.
"Second, they are concerned about the ability of traditional interstate pipelines to provide responsive, flexible services tailored to the needs of offshore gas suppliers.
"And finally, the producers see that greater contracting flexibility is being allowed for new offshore pipelines."
Jerald Halvorsen, Interstate Natural Gas Association of America president, said, "In the competition for offshore pipeline business, traditional regulated pipeline companies are getting a shrinking piece of the capacity pie.
"Economics, not regulation, must drive development of the gulf, and that is simply not happening under the current regulatory regime. For that reason, the Federal Energy Regulatory Commission's inquiry into how to change its offshore regulatory policy is timely and much-needed."
Copyright 1998 Oil & Gas Journal. All Rights Reserved.
