In the past 10 years the cost of building natural gas pipelines in North America has tripled, with the U.S. Northeast being the most costly area, according to a report announced Friday by Calgary-based Ziff Energy. The implications are clear for burgeoning shale plays where much new takeaway infrastructure still needs to be built.

In contrast to the Northeast, where costs are about 75% greater than the North American average, the Texas/Southeast region around the Gulf of Mexico (GOM) remains the low-cost area, well below the average, said Bill Gwozd, Ziff senior vice president for gas services.

The study by analyst Julia Sagidova for the fifth time in the past 10 years analyzed more than 147 gas pipelines, with the large ones ranging in diameter from 24 to 36 inches. A typical 100-mile line in these diameters has averaged about $600 million, Sagidova said.

The way Gwozd summarizes the results is that the industry now is looking at new pipeline costs of about $200,000 for each inch of diameter/mile, meaning a 30-inch diameter line would cost about $6 million/mile. He said the Ziff report used a one-to-one exchange rate and U.S. dollars for its cost statistics.

“These are huge costs,” Gwozd told NGI on Friday, asserting that this has real implications for shale plays like the Marcellus and Utica. He said building pipelines in the Northeast requires costs that are at least 50% higher than the North American average.

“This is true for a couple of reasons: population density requires extra safety factors built in and routing of the pipelines around various locations,” said Gwozd, adding that construction takes longer because there are more restrictions on when the work can be done.

Western Canada construction across extreme mountainous areas also is on the high side, but not as high as the Northeast, Gwozd said, putting that area about midway between the North American average cost and the U.S. Northeast costs. In general, the additional environmental costs for pipeline operators are one of the main reasons for costs generally spiraling upward.

In contrast, pipelines in Texas and the Southeast would be about one-third to one-half less than the North American average because there are already lots of pipes in the area; local communities are accustomed to them; and the rights-of-way are readily available, Gwozd said. “It is just like a regular business environment there for pipelines,” he said.

“The Texas region is one of the lowest-cost areas in all of North America. Besides the U.S. Northeast, the other higher cost areas for new pipelines are the U.S. Midwest and Western Canada.”

For new pipelines generally, when today’s costs are broken down, about 80% is related to the pipeline and 20% for compression, Gwozd said.

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