If a variety of industry experts are correct, the western United States is on the brink of an upsurge in natural gas demand outstripping supply and resulting in a need for a new wave of infrastructure being built from the Rockies westward.
This was an overriding theme of remarks by a half-dozen speakers at the LDC Gas Forum Rockies & West in Los Angeles Tuesday and Wednesday, and it was echoed by representatives of gas buyers and sellers alike.
Alan Killion, WPX Energy Inc. west region marketing director, said that between now and 2018 “gas demand is going to outstrip supply, predominantly because of power generation.” This is accompanied by Canadian supplies virtually “drying up” for the U.S. Northeast and Midcontinent regions, Killion said.
“There are a lot of things changing in the West, including increased demand for exports to Mexico,” he said.
Jeff Welch, EDF Trading North America senior vice president, is projecting growth mostly in the U.S. West and Mexico of 2-5 Bcf/d over the next five years, coming in “chunks.” The key thing for Welch is the demand is “heading West.”
With a “very, very strong east-to-west push,” Welch said the clear implication that a lot of infrastructure will need to be built.
“To the extent that proposed LNG [liquefied natural gas] projects in the West move forward, that is going to require more infrastructure to make that happen,” said Justin Carlson, senior manager for North American natural gas analysis at Bentek Energy. He said that the Rockies has plenty of additional supply to meet new demand in the West.
Carlson said the Rockies probably will require another major pipeline westerly because there is not much extra capacity on any of the existing lines, although he still thinks there will be a continuing push for Rockies gas to flow east to the Midcontinent market in the greater Chicago area.
Even with the prospects of substantial additional supplies in the West, capacity limitations are real, according to Steve Baird, gas acquisition manager at Southern California Gas Co. (SoCalGas). “It is pretty much Kern [River Pipeline] and Ruby [Pipeline] right now,” Baird said.
“In order for us to enjoy the price advantages of these supplies, we would have to have the gas come south into Transwestern or El Paso’s interstate lines,” Baird said. “It seems like that is the only way we are going to get that gas out of that area.”
SoCalGas buys about 1 Bcf/d of gas and it holds firm capacity on various interstate pipelines for about 1 Bcf/d.
“We’ll always hold a lot of capacity; we’re conservative, and it is just like we hold storage, and we love having it as a hedge of prices,” Baird said. “I would prefer to have some more pipeline expansion, however, particularly from the Rockies and Canada. That gas is pretty darn cheap, and it would be nice to have added capacity from there.”
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