Over the next few years much of the gas industry is expected to be heading for the hills of Appalachia with projects to process and pipe natural gas from the Marcellus Shale. Analysts at Tudor, Pickering, Holt & Co. Securities Inc. (TPH) think that from 2009 to 2013 more than $10 billion will be spent on gas infrastructure in the region.
Based on the firm's gas supply study published last summer, Becca Followill and Jessica Chipman predict that current Appalachia gas production of about 2.5 Bcf/d will grow to about 6 Bcf/d by 2013 and then to about 7 Bcf/d by 2015 and about 9 Bcf/d by 2020. With regional demand averaging 13 Bcf/d (with a low of 8 Bcf/d and a high of more than 20 Bcf/d), down the road there is room for gas exports from the region, the analysts wrote in a report published last Wednesday.
About 6 Bcf/d of new pipeline capacity has been announced since the Marcellus began attracting significant attention, Followill and Chipman wrote. Additionally, about 250 MMcf/d of processing and about 40,000 b/d of fractionation capacity have been announced, by their tally.
The companies that are most active in developing incremental Appalachia infrastructure are those with assets already on the ground in the region. Most active on the pipeline front are El Paso Corp., EQT Corp., National Fuel Gas Co., Williams, Spectra Energy Corp., Dominion and NiSource Inc., according to the TPH analysts.
EQT and Williams are leading the development of gathering and processing along with MarkWest Energy Partners LP, which recently completed a processing expansion (see NGI, Dec. 21, 2009). MarkWest also is leading fractionation development. MarkWest's "investment in [the] Marcellus is already meaningful and will grow in size," the analysts wrote.
Spectra recently secured Chesapeake Energy Corp., Consolidated Edison and Statoil Natural Gas for an expansion of its Texas Eastern Transmission and Algonquin Gas Transmission systems in the region (see NGI, Jan. 4a).
Projects in Appalachia could be challenged by the region's topography and coal-producing interests, the analysts noted.
Another challenge to Marcellus development could come from environmentalists, particularly in New York State. There the Independent Oil & Gas Association of New York is leading a campaign in support of the adoption of shale well drilling and stimulation practices that would allow the industry to proceed with development (see NGI, Jan. 4b).
"Beyond the knowns, there are also lots of unknowns about Appalachia that are worth pointing out," the analysts noted. "Areas where we don't yet have visibility include: What will long-term basis differentials be? How much liquids takeaway capacity is needed and where will it go? What additional pipelines/infrastructure is in the planning stage?"
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