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On Marcellus Growth, Natural Gas ‘Replumbing’ Underway
Almost every week projects to build or expand natural gas pipelines and natural gas liquids (NGL) midstream infrastructure is unveiled, and most of the news has one thing in common: the Marcellus Shale, something that’s not likely to change anytime soon, according to industry executives.
Many of the biggest pipeline systems now carry gas to U.S. East Coast markets. But with so much gas being produced in the Marcellus Shale, some of the pipes have to be rerouted, according to Rusty Braziel of RBN Energy LLC. He spoke last Tuesday at the 92nd Annual Gas Processors Association Convention in San Antonio.
Marcellus gas supplies have grown from about 2 Bcf/d in 2005 and are tracking to hit 18 Bcf/d in 2017, he said. The increase in supplies from the Marcellus, and potentially from the Utica, will turn off gas imports from Canada and lead to more streams being reversed in the Lower 48 states.
“A lot of replumbing is going to be required” for pipelines and storage, Braziel told the packed audience. He elicited some laughter with a “suggestion” that some of the west-to-east pipes eventually could be turned into water slides.
Domestic gas production is at an all-time high, with 16.2 Bcf/d of incremental growth in the Lower 48 states in a little more than two years, he noted. However, the Marcellus Shale’s output today eclipses any other producing U.S. basin and will change the maps for gas infrastructure.
Why? Up to now, the Northeast needed gas supplies. The big pipes run east. But if the Marcellus can handle the big demand on the East Coast, pipelines may have to be reversed, rerouted or repurposed. As it is, there’s a lot of gas now at the wellhead ready to be transported to markets or storage.
The inventory of drilled but nonproducing wells in northern Pennsylvania, which stood at just under 1,200 wells last May, “will take five years to clear,” Braziel told the audience. In January 2011, total gas production in the Marcellus was about 4 Bcf/d, he explained. Today it’s more than 10 Bcf/d and rising. Producers are obtaining high rates of return in the wet gas window from NGLs, but they also have an inventory backlog of wells in the dry gas window — so output could be much stronger today if infrastructure could accommodate it.
RBN research found that the Pennsylvania gas well backlog began in 2009, and as of last May Pennsylvania’s Bradford County had close to 400 wells awaiting completion. Big backlogs also are in Lycoming, Tioga, Susquehanna and Clearfield counties.
Even with the slowdown in the gas patch, overall domestic dry gas production is forecast to grow another 9 Bcf/d, or about 1.8 Bcf/d every year from 2012 to 2018, according to research compiled by RBN and Bentek Energy. By comparison, U.S. dry gas output between 2005 and 2012 grew about 2.3 Bcf/d every year, Braziel noted.
Areas also expected to show the biggest jump in output to 2018 are Texas, to about 22 Bcf/d from 18 Bcf/d; the Midcontinent market, to 1.1 Bcf/d-plus from 0.6 Bcf/d; and Midcontinent producing, to nearly 8 Bcf/d from just under 6 Bcf/d.
The Southwest and Rockies producing areas should see output remain basically flat over the period, while in the Southeast and offshore, gas output is forecast to decline. So what happens to the current pipeline trajectory? Many companies already are addressing the situation.
Trunkline is planning a gas-to-crude pipeline conversion between Patoka, IL, and St. James, LA (see NGI, Feb. 25). Kinder Morgan Energy Partners LP’s 1,025-mile Freedom Pipeline LLC would carry Permian Basin crude from Texas to Southern and Northern California; it includes converting 740 miles of existing gas pipe (see NGI, Jan. 21).
Williams and Boardwalk Pipeline Partners LP’s Bluegrass Pipeline is designed to carry 200,000 b/d of mixed (y-grade) NGLs from the Marcellus and Utica shales to the Gulf Coast (see NGI, March 11). Kinder Morgan Interstate Gas Transmission LLC’s plan is to convert a portion of the Pony Express gas pipe to carry crude from the Bakken Shale (see NGI, Sept. 10, 2012). Crude pipelines also are considering reconfigurations; Enbridge Inc. and Enterprise Products Partners LP plan to double the capacity of the Seaway Pipeline to 850,000 b/d by mid-2014 to allow new flow paths to market.
RBN’s intra-regional flow analysis shows a stunning reversal of gas supplies from Eastern Canada to the Northeast, moving from a high of close to 3 Bcf/d in 2011 to almost nothing by the middle of 2014. Midcontinent market gas to northeastern demand centers also slides into reverse, from more than 2 Bcf/d in 2010 to a deficit by 2015. Southeast supplies are forecast to fall steadily through 2017, as well as Western Canada gas carried to the Midcontinent market. Also falling is Rockies gas to the Midcontinent production and market areas.
Rockies gas supplies to the Pacific Northwest are forecast to be relatively flat from 2012 to 2017. However, Texas gas to the Southwest is predicted to increase over the period, with exports to Mexico steadily rising.
NGL processors have a lot of business coming their way, but there has to be infrastructure in place before the money can be made. U.S. NGL output could jump by 1.3 million b/d from 2012 to 2018, according to Braziel. There’s no region of the country where NGL output is forecast to decline over the next four years. Nearly a dozen new processing projects are on the drawing board.
“It seems like a new fractionator is announced about every two weeks,” Braziel said, citing a recent decision by Phillips 66 to build a plant in Old Ocean, TX, to process up to 100,000 b/d (see NGI, April 8).
Peter Fasullo of EnVantage, who shared the panel discussion, said “midstream companies are exercising greater leverage in contracts with producers…At the same time, midstream companies are trying hard to get their facilities contractually full.”
Fractionation facilities had the capacity to extract 2.6 million b/d in 2012, up from 1.7 million b/d in 2005, Fasullo noted. By 2015, about 1.3-1.7 million b/d more of NGL capacity is expected to be online. However, he agreed with Braziel: ethane rejection may continue for years.
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