Natural gas pipelines added a record 12.8 Bcf/d of new transportation capacity during 2002, but the Energy Information Administration (EIA) in a special report predicts the feverish pace will slow over the next several years due to the downturn in the economy, project cancellations and postponements by power generators and the grim financial state of the energy industry.

In fact, it estimates that 20-30% of the proposed pipe capacity additions scheduled for 2003-2005 will not be built.

In 2002, 54 gas pipeline projects (the majority of which were expansions) were completed, contributing more than 3,571 miles of new facilities to the nationwide pipeline grid, the EIA said in its report, which was released Thursday. “While the current inventory of proposed additions for 2003 and for 2004-2005 [points to] a continuing increase in the rate of annual capacity additions, there are indications that these levels will probably not be fully realized. Indeed, signs point to a drop in the rate of new capacity additions over the next several years or at least to their numbers leveling off.”

Over the past two years, “many of the market factors that helped fuel the large growth in new pipeline capacity additions have changed significantly,” causing power generators to either cancel or delay plans for new gas-fired capacity, the Department of Energy (DOE) agency said.

Moreover, “the deteriorating financial condition of a number of energy companies over the past year and the cessation of gas trading as a line of business by a number of others have caused some pipeline company subsidiaries to re-evaluate their commitment to specific pipeline expansion proposals,” the EIA noted.

The demand for new import pipeline capacity from Canada also appears to have reached a “temporary plateau,” the agency observed. Since 2000, only 207 MMcf/d of new import pipe capacity has been added into the U.S. Western region, it said, noting that a proposed 163 MMcf/d expansion to the Western region was recently canceled.

“No additional new projects have been proposed to increase import capacity from Canada into the [U.S.] Midwest or Central regions through 2005. Import capacity development in the Northeast region, however, is a potential exception to the trend,” according to the EIA. Six import expansion projects are planned to add 2,109 MMcf/d through 2005, mostly to serve proposed generation in Boston and the New York metropolitan area.

Five major new pipeline systems were completed and placed into operation in the U.S. last year. These included the 560-mile, 1.13 Bcf/d Gulfstream Pipeline; the 80-mile, 500 MMcf/d North Baja Pipeline; the 405-mile, 87 MMcf/d Questar Southern Trails Pipeline; the 142-mile, 750 MMcf/d Guardian Pipeline; and the 29-mile, 380 MMcf/d Horizon Pipeline. Also, 12 short-haul, large-capacity laterals were constructed, adding 303 miles and 3,280 MMcf/d to the nationwide grid.

At the same time, however, ten major pipeline projects were canceled in 2002, the EIA said. The projects represented 4,827 MMcf/d of potential capacity and 1,450 miles of pipeline, and initially were scheduled to be placed in service between 2002 and 2004. The most prominent among the cancelations were the Independence Pipeline project and ANR Pipeline’s Supply Link project.

The Southeast and Western regions saw the largest increases in gas pipe capacity in 2002, the EIA reported. “The installation of the Gulfstream Pipeline system and the completion of a 478 MMcf/d expansion of the Florida Gas Transmission system in the Southeast contributed to making that region the leader in new natural gas pipeline capacity (3,056 MMcf/d), added miles of pipe (915) and total expenditures ($1.8 billion).” In response to the energy crisis, the West had capacity additions of 2,852 MMcf/d last year.

At the end of 2002, EIA reported that 85 companies made up the U.S. interstate gas transportation network, operating 212,000 miles of pipe and possessing the capability to deliver more than 133 Bcf/d. This represented a 2% hike in mileage from the 2001 level and an 11% increase in interstate pipe capacity, the agency said.

Looking ahead, the EIA said 112 gas pipeline expansion projects have been proposed for the Lower 48 states for 2003 through 2005. For 2003, 61 projects are planned; for 2004, 36 projects; and for 2005, only 15 projects to date.

Of the 61 projects planned for 2003, the agency noted that only 42 have been approved by regulators so far, 13 are awaiting action by the Federal Energy Regulatory Commission, and six projects (1,323 MMcf/d) have yet to be filed and remain in the planning stages. The EIA believes it is “more likely that a substantial portion of the 1,323 MMcf/d represented by these six projects will not be installed in 2003, being either canceled, placed on indefinite hold or, more likely, postponed until 2004.”

For 2003, the EIA estimates that 12 Bcf/d, or only 11 Bcf/d, of total new pipeline capacity will be added.

As for 2004 and 2005, only 14 of the 51 proposed pipeline projects have been approved, and 13 are awaiting action by regulators. “The remaining … projects are still in the concept or planning stage. Indeed, project specifications for more than 8,800 MMcf/d of the 18,939 MMcf/d capacity additions proposed to date have yet to be finalized. At this stage, it is impossible to predict what portion of the current 19 Bcf/d estimate will eventually be developed,” according to the DOE agency.

“Despite the fact that a 12.9 Bcf/d increase in gas pipeline capacity has been proposed for 2003 and another 18.9 Bcf/d for 2004-2005, it is likely that only about 70 to 80% of the proposed capacity additions will eventually be completed,” the EIA said.

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