The next phase of Marcellus growth in the midstream sector will be crucial to future development, but the markets will ultimately determine which pipeline projects are successful, according to Ryan Savage, general manager, Appalachian Basin, at Williams Co.
Though several new projects are on the drawing board for the company, Savage argues that current Marcellus growth is outpacing regional demand growth. Forecasted supply will reach 17.5 Bcf per day by 2020 for rich and dry gas, while current supply sits at about 3.5 Bcf per day. That is an increase of 14 Bcf per day. However, East coast demand is forecasted to only grow by 4.4 Bcf per day reaching 21.9 Bcf over that same period. What this means, according to Savage, is that new demand and access to that demand is needed for Marcellus production.
Current transmission lines are filling up fast, and having harvested what Savage terms, “the low-hanging fruit,” multiple new takeaway projects are needed. “We have got to start looking at new takeaway projects, and we need to start building them now,” he told the audience at Hart’s Developing Unconventional Gas East conference on November 15, 2011.
New projects for the company include the Southwest Pennsylvania expansion, a planned system capacity expansion of about 1.5 Bcf per day, with the ability to deliver 1.2 Bcf per day into the TETCO, Atlantic Access corridor.
Also, the Northeast Pennsylvania expansion is under way, with a planned system capacity expansion of 1.25 Bcf per day. The system will deliver to the Millennium pipeline, Transco and Tennessee 300 markets.
Don Raikes, vice president of Dominion Resources Services Inc., agrees with Savage, stressing the importance of future demand markets. “One of the struggles we have is demand. Power generation is supposed to grow demand, but I haven’t seen that pan out yet,” he says.
He notes that the traditional LDC markets are no longer the primary infrastructure growth engine, and that power generation remains the only significant potential demand growth source. Incremental demand in the Northeast, according to Raikes, will be driven by EPA (Environmental Protection Agency) regulations and coal-fired generator retirements in the region.
However, notes Raikes, significant generation growth is expected in the Mid-Atlantic States. To that end, Dominion has several new projects set to roll out, including the new Cove Point Export project, which is gaining momentum and is scheduled to be in service by the fourth-quarter of 2016. The Cove Point LNG facility will have up to 1.8 MMDt in send-out capacity, and close to Bcf equivalent in LNG storage.
According to Robert Riga, the general manager of Northeast business development of Spectra Energy Corp., demand will depend on new projects to help meet the needs of future markets.
“These new projects that are currently in execution will add an incremental 1.5 Bcf per day of firm capacity at various locations along our pipeline system in the Northeast.”
To that end, the TEMAX and TIME III project has recently been completed and was placed into service this October. The project includes 455 MMcf per day of capacity, with shippers such as ConocoPhillips. The project provides customers with ready access to Rockies supply as well as a new delivery outlet at Transco Station 195 via the Marietta Extension. “The Marietta Extension is a strategic piece of pipe in our view, because it offers our producer shippers valuable market optionality for the gas they will ship on our Texas Eastern system,” he says.
Next in the project line, the TEAM 2012 expansion project will grant customers access to the Marcellus and Rockies production areas. The project will include some 200 MMcf per day of additional capacity, and customers such as Range Resources Corp. and Chesapeake Utilities have already signed on. The project will consist of 16.3 miles of 36-inch pipeline, and 20,720 horsepower of additional compression.
Beyond these expansions, Spectra Energy plans to be well positioned to take advantage of the increased utilization of gas-fired power generation facilities currently attached to its system.
Riga notes, “We think that power generation will be a big factor in demand growth in the near term, leading up to some of the longer-term demand opportunities that are out there, such as LNG export and gas to liquids technology.”
Whether demand growth comes from power generation, or other sources, midstream experts agree that new sources need to be in place to meet the production growth of the Appalachia shales.
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