From the perspective of one of California’s experts on the state’s supply, demand and infrastructure for natural gas, the advent of an explosion of new interstate pipeline and imported liquefied natural gas (LNG) projects into the state is proving to be a very pleasurable diversion from the state’s well-publicized real-time energy woes.

With California’s past 12 months of energy price spikes and infrastructure constraints, Bill Wood, the chief natural gas specialist for the California Energy Commission, is glad to have the prospect of a surplus. That surplus is expected to increase reliability and dampen prices in a market that has sustained the highest wholesale natural gas and electricity prices in the nation and is dependent on out-of-state sources for more than 80% of its natural gas supplies. As of May, Wood calculated interstate capacity of about 7 Bcf/d to the border with “takeaway” capacity of 6.7 Bcf/d inside the state.

Wood thinks at least two of the proposals may be redundant, and not all of them are likely to be built, but he cautioned that the interest in greatly expanding interstate capacity throughout the West is squarely pointed at California, although a lot of the added volumes will be dropped off along the way or at the increasing number of power plants being planned in neighboring Oregon, Nevada and Arizona.

“In the western states, there are about 60,000 MW of proposed generation, and only about one-third is supposed to be built in California,” Wood said. “The rest is scattered around our neighboring states.”

Eight expansion proposals collectively total between 3-4 Bcf/d of new interstate capacity — not all of which is slated to come into the state, or necessarily into the established utility transmission systems, but rather go directly to large new gas-fired power plants. At this point Southern California Gas has announced plans to expand its intrastate “takeaway” capacity by about 200 MMcf/d by the end of the year. Longer term, a much broader expansion by both SoCal and Pacific Gas and Electric would be necessary, even to handle a fraction of the added interstate capacity now contemplated.

A growing thirst for ever-more new gas-fired power generation in and around California has sparked at least eight major pipeline and LNG proposals and several more that haven’t been officially announced yet, Wood said.

If he was a handicapper, Wood said he would make the co-favorites: any expansions out of the San Juan Basin into California, such as Transwestern Pipeline’s 100 MMcf/d expansion and the 110 MMcf/d Questar Southern Trails (oil conversion) Pipeline; the recently FERC-approved El Paso All-American oil pipeline conversion and PG&E/Sempra North Baja projects; and PG&E’s National Energy Group Pacific Northwest Transmission expansion; Kern River Pipeline’s proposed expansions; Kinder Morgan/Calpine’s Sonoran Pipeline project; and the Colorado Interstate (El Paso subsidiary) Ruby Pipeline to Reno, NV, and into California. An array of conceptual LNG projects would be the long shots.

Wood noted that El Paso could end up being considerably stronger in the new pipeline mix, because an expansion in the state combining its existing Mojave Pipeline and the converted in-state portions of the All-American pipeline could extend from the Arizona border north to two population centers in Sacramento and the East San Francisco Bay area, crisscrossing every major transmission pipeline carrying gas in the state.

“I am pretty sure El Paso will be very involved in capacity expansion because of the North Baja pipeline (which gained FERC approval last Wednesday),” Wood said. “There are 500 MMcf/d on that line, and only about 150 MMcf/d of capacity has been tied up on the El Paso line to service (the proposed power plant at) Otay Mesa. All the other demand hasn’t been awarded any capacity (on El Paso) yet. They probably have capacity as a result of their new open season that they just completed. My guess is that a lot of it would be on the El Paso’s Northern System and the Rocky Mountain systems to meet the Mexican demand, rather than coming off the Permian Basin.”

For LNG, besides El Paso and Chevron proposals for North Baja or somewhere along the U.S. West Coast, Wood said, there is at least one other “consortium” looking at a project for North Baja. He also said a delegation from the New Guinea visited the California Energy Commission earlier this month looking for a market for what they estimate as 15-30 Tcf of natural gas.

Wood said he tried to suggest they consider natural gas liquids and various petroleum products that could be handled almost immediately at existing docking and refining facilities, rather an LNG project that would require more time, money and face stiffer competition. “The question is how much natural gas do they want to develop?” Wood noted. “The gasoline market demand grows about two percent annually here, and there is not much chance for new refinery capacity.

“There are a number of opportunities here to bring that LNG gas into California (from North Baja) through Ehrenberg and the west-of-the-border-crossover. But I don’t know how positive these LNG proposals are, given all the pipeline proposals we’ve got right now.”

In-state gas supplies, which in recent years have accounted for 10-15% of the state’s supplies, are not a serious factor at this point, said Wood, although he and the state oil/gas department are watching the deep-drilling projects in the east Elk Hills and the others around the farming town of Delano in the southern end of the San Joaquin Valley in Kern County, which historically was one of the 20th Century’s biggest domestic U.S. oil and gas basins.

“I think the deep-drilling probably has more potential,” Wood said. “I talked to DOG (state oil/gas department), and they said be careful [of relying on early reports]. They said don’t bank your hopes too much on it.” Wood noted, however, that the state oil/gas department is keeping a close eye on those exploration efforts, both of which have raised high expectations by their backers. Some of the hype, Wood said, “may just be marketing schemes.”

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