Gas pipeline and storage expansions slowed considerably in 2003 in part because of customer creditworthiness issues, higher steel prices and a slow down in power generation development, according to a new report by the Energy Information Administration (EIA). EIA tallied 49 pipeline projects with 10 Bcf/d of pipeline capacity additions ($3.6 billion in investment), and nine storage projects adding 19 Bcf of working gas storage capacity in 2003.

Pipeline capacity additions were 19% lower than in 2002 and storage capacity additions 27% lower than the previous year, EIA said in its report on “U.S. Natural Gas Pipeline and Underground Storage Expansions in 2003.” Furthermore, the current inventory of “new pipeline capacity/mileage development projects indicates that pipeline capacity additions will drop once again in 2004,” EIA said.

In 2003, the most pipeline capacity growth occurred in the Gulf of Mexico where 1.825 Bcf/d of new capacity was added to handle new deepwater gas supply. Capacity additions in the Gulf represented 74% of all new capacity in the Southwest region and 18% of all new capacity in the United States. “Continued deepwater gas and oil development in the Gulf of Mexico could also result in more than 1,700 MMcf/d of new gas pipeline capacity being installed in the Gulf in 2004 (if all currently approved 2004 offshore scheduled projects are actually completed in 2004),” the agency said in its report.

Another major pipeline addition last year was the Kern River expansion, which doubled the pipeline’s capacity by adding 900 MMcf/d of new space. The project greatly increased much needed takeaway capacity from the Rocky Mountain gas producing basins and provided greater access to cheaper gas supplies for markets in California and the Southwest. However, after several years of substantial capacity growth, pipeline additions in the Rockies are expected to slow this year. Only six projects totaling 560 MMcf/d of capacity are planned for 2004. And while eight projects with 3,970 MMcf/d of new capacity are planned in 2005, only three of these have gotten past the planning stage and only one, Cheyenne Plains (560 MMcf/d initially), has been approved by regulators, EIA noted.

Export capacity to Mexico continues to grow by leaps and bounds. It increased by 24% or 696 MMcf/d, marking the second year in a row that capacity additions to Mexico have grown by more than 600 MMcf/d. Since 1998, export capacity to Mexico has nearly tripled. Annual load factors on those export pipelines also have risen to 32% in 2002 from only 15% in 1998, EIA said.

Import capacity from Canada barely grew at all in 2003. Only 44 MMcf/d of Canadian import capacity was added in the U.S., the smallest amount since 1994.

Environmental concerns over the routes of the Millennium Pipeline in New York and the Islander East project in Connecticut held up those two projects, which could have added 714 MMcf/d and 250 MMcf/d of capacity, respectively. Although both projects were approved by the Federal Energy Regulatory Commission, they were blocked by the states through the use of the Coastal Zone Management Act. Millennium has since decided to phase in its project, and Islander East is still battling the state of Connecticut, which has blocked construction of the pipeline. The near-term outlook on pipeline development in the Northeast is rather bleak, according to EIA estimates. While about 2.3 Bcf/d per year of additions are planned, several of those projects are uncertain.

Of the nine storage projects completed last year, about 68% of the added working gas storage capacity (19 Bcf) and 83% of the withdrawal capacity was from salt cavern storage projects. Only one new salt cavern was built; the rest of the capacity additions were from expansions of existing caverns. Most of the storage development (55% in 2003) has occurred in the Southwest and Gulf Coast regions, where there is ample gas pipeline capacity and the geology is favorable for storage additions.

The EIA said it expects continued emphasis on the development of salt cavern storage, which provides rapid cycling capability and can respond quickly to market needs and changes. A total of 31 salt cavern projects have been proposed for development over the next five years, representing about 46% (158 Bcf) of all the proposed working gas capacity and 69% (11.5 Bcf/d) of the proposed deliverability.

For more details from EIA’s report go to https://www.eia.doe.gov/.

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