NGI The Weekly Gas Market Report
Market access issues are becoming a major challenge fortransmission and distribution markets, which face unprecedentedgrowth and increased deliveries, and while it’s still unclear as towho will be willing to finance and construct the required newfacilities, a huge capital investment has to be made just to meetdemand, an industry analyst said yesterday.
Blaise Poole, who manages strategy and business development forEl Paso Energy Corp., told the International Association ofDrilling Contractors in Houston that the natural gas transmissionand distribution market faces inherent infrastructure problemsbecause of increasing demand. Fundamental market changes, alongwith shifts in U.S. demographics, are creating challenges for thedistributors, he said.
“The rules are changing,” said Poole, who has worked with theNational Petroleum Council on market studies. “The operationalaspects of gas-fired electricity generation drives the need for newservices, and that changes the risks for T&D.” Restructuring,Poole said, has changed the roles of market participants — theLDCs, electric utilities and the marketers — and changed themakeup of who makes investments in new transmission anddistribution.
“Restructuring has resulted in the demise of LDCs and utilitiesmarkets” from the way they were a few years ago, he said.Restructuring also has led to other changes. “Generators now arereluctant to enter into long-term contracts because they consider along-term contract too risky. Shippers view long-term obligationsas risky too.” And because of the hesitation, there’s morehesitation from companies stepping forward to make investments innew infrastructure.
The capital investments for new facilities, pipelines andtransmission lines are needed at the rate of about $2.5 billion ayear through 2015 just to keep up with the anticipated demand, saidPoole. High on his list of “to do” are more transmission anddistribution systems and more storage capacity.
“Access will be severely limited in the Rockies and Gulf ofMexico without them. California has the largest commitment topipeline construction, but increased storage demand will be neededthroughout the West Coast and in the Gulf.”
Comparing distributors with his drillers in the audience, Pooletold them that while they complained about needing more land todrill on and the right-of-way access to get the energy out of theground, transmission and distribution companies needed theright-of-way access to “bring it out.”
Getting that access, though, is becoming more difficult. Becauseof urban sprawl, companies now deal with more rights-of-way issuesthan ever before. “We’re not dealing with farmland anymore. Peoplehave moved out where we used to be able to obtain access. Now weare dealing with landowners.”
On top of that, he said, “misinformation” sometimes leads to apublic awareness problem, which in turn limits companies’ abilitiesto build. “There’s more restrictive permitting, and that’s drivenby environmental and safety concerns.”
Without access, companies faced a diminished capability to routethe transmission lines and it has made construction a lot lessefficient. That, he said, has to change, and he suggested thatmore coordination by federal agencies could be the answer.
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