By Paula Dittrick
Senior Staff Writer
HOUSTON, Feb. 17 -- The availability of natural gas supplies to meet future demand hinges upon infrastructure development, US Federal Energy Regulatory Commission Chairman Pat Wood III told Cambridge Energy Research Associates' annual conference Feb. 16.
Wood listed four areas of vital infrastructure in the following order:
--Construction of a gas pipeline from Alaska's North Slope to the Lower 48 states.
--Permitting and construction of additional LNG receiving terminals.
--Rocky Mountain pipeline expansions and the creation of new capacity to meet demand.
--Construction of additional gas storage.
The Alaska gas pipeline, estimated to cost $15-20 billion, will prove to be the largest single civil engineering project in the US, Wood said. He believes that it will not be operational until 2012, at the earliest.
In October 2004, Congress authorized construction of the pipeline and selected tax provisions. This month, FERC issued its open-season rules for the pipeline. Wood said FERC took steps to ensure that all producers have access to the pipeline regardless of which oil companies ultimately build the system.
The nation's developing LNG industry is facing its "critical years," Wood said at the Houston conference. "I do expect that we will see some additional LNG plants on either coast in our country as well as in our neighbors' to the north and south."
He anticipates that at least eight new receiving terminals will be constructed in the US, Canada, and Mexico by 2010. "Then, it will be 'onesies, twosies' after that," he said.
Wood said the success of each the 40 receiving terminals proposed for North America will hinge in large part upon how well the project developers communicate with the communities in which the terminals would be built.
"We've got to look at the environmental issues and safety concerns. We can balance the need for gas supplies with the need to protect our citizenry," he said.
Rocky Mountain gas
The Rocky Mountain region is in the process of overtaking the Gulf of Mexico as the top US gas producing area, he said.
"The importance of getting new supplies online quickly from that region, which can go both to the west and to the east, has increased," Wood said of the Rockies. FERC has responded to this need by accelerating its pipeline approval process.
For example, FERC recently granted fast-track approval to Cheyenne Plains Gas Pipeline Co., a unit of Houston-based El Paso Corp., for a 380-mile natural gas pipeline from El Paso's Cheyenne Hub south of Cheyenne, Wyo., to Greensburg, Kan. (OGJ Online, Feb. 24, 2004).
"As we begin to ride the peaks and valleys of world natural gas prices, gas storage in our country will become increasingly important for the price arbitrage benefits," he said.
Full storage fields and adequate pipeline capacity will ensure stability, which will help guarantee that "volatility in this weather-driven commodity is reasonable and can be managed well by risk managers," Wood said.
Construction of additional storage and pipeline capacity to meet market demand "will go a long way toward buffering the price that consumers pay for natural gas and enhancing customer confidence," he added.
Contact Paula Dittrick at [email protected]