Pipeline Mid-Year Review

The largest source of energy in North America comes from petroleum, including oil and natural gas. Together, they supply 65% of the energy that Americans consume, according to the U.S. Energy Information Association (EIA). The vast majority of this product usage is made possible by the growing number of large, interconnecting pipeline systems throughout the U.S.

Midstream companies will continue to invest in new infrastructure projects so that production in these shale plays can continue unabated. Major operators are of a like mindset, because natural gas and petroleum pipeline projects have increased substantially in this boom of onshore production.

New pipelines are needed to pioneer new areas of production, and the nation’s pipelines offer the safest method of transportation. In fact, pipelines deliver trillions of cubic feet of natural gas and hundreds of billions of tons per mile of liquid petroleum products each year with few incidents.

According to Hart Energy Mapping and Data Services, the nation contains some 100,000 miles of onshore crude oil pipelines, around 611,000 miles of onshore gas pipelines and some 2 million miles of distribution pipelines.

The volume moved through pipelines is well beyond the capacity of any other form of transportation. In fact, according to the EIA, a constant line of tanker trucks, about 750 per day, would have to be loaded every two minutes, 24 hours a day, seven days a week, to move the volume of the most modest pipeline. Fortunately, major midstream companies are responding to the shale play boom quickly with new pipeline projects throughout the U.S.

Northeast region

Multiple natural gas pipeline systems operate within the Northeast region, an area that includes Connecticut, Delaware, Massachusetts, Maine, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia and West Virginia.

Natural gas pipelines and local distribution companies serving the Northeast have access to supplies from several major domestic natural gas producing areas and Canada.

Most of the imports from Canada come into the U.S. through New York, Maine and New Hampshire. Also, several liquefied natural gas (LNG) import terminals are located in this region.

The Northeast, home to the prodigious Marcellus shale play that covers some 95,000 square miles in six states, will likely experience major construction growth, thanks to increased drilling activity.

Although estimates of the resource vary, upward of 500 trillion cubic feet (Tcf) of reserves is forecast for the play. Also, at yearend 2010, permits for wells in the Northeast number more than 2,100, according to Pennsylvania state records. That’s a staggering 2,022% percent increase from the 99 permits issued in 2007. The majority of all interstate natural gas pipelines entering or operating within the Northeast terminate in Massachusetts and Maryland, including several large, long-distance pipeline systems that deliver supplies to the region from the producing areas in the U.S. Southwest. The largest of these pipelines is owned by Transcontinental Gas Pipeline Co., which extends from South Texas to the New York City area.

The largest interstate natural gas pipeline system operating in the region is Columbia Gas Transmission Co., which services Maryland, New Jersey, New York, Pennsylvania, Virginia and West Virginia. Columbia receives its Gulf of Mexico natural gas at the Kentucky border from its major trunk line supporter, Columbia Gulf Transmission Co.

Also, Dominion Transmission Inc. has a notable presence in the area, and has been increasing pipeline capacity with several infrastructure projects.

As recently as January 2011, in an effort to gather, process and transport the growing volumes of high-Btu (wet) Marcellus natural gas production in Marshall and Wetzel counties, West Virginia, and surrounding counties in Pennsylvania and Ohio, Dominion Transmission unveiled its new Marcellus 404 project.

The project is designed to provide firm transportation, as well as gathering and processing services, for up to 300 million cubic feet (MMcf) per day of natural gas. Fractionation capacity for 32,000 barrels (bbl.) per day of natural gas liquids will also be available.

Other new construction projects include Tennessee Gas Pipeline Co.’s 300 Line Expansion project, which will add 350 MMcf of capacity per day for the region.

Central region

In the Central regions, as many as 22 interstate and at least 13 intrastate natural gas pipeline companies operate in Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota, Utah and Wyoming.

The region consumes less natural gas than it produces, (about 48%, according to the EIA) and therefore is a net exporter of natural gas.

However, the region has several large metropolitan markets that are major destinations on the regional interstate natural gas pipeline network. Two of the largest include Denver, Colorado, and Salt Lake City, Utah.

The region contains parts of the Niobrara and Bakken shale plays, both of which are spurring new construction projects.

In fact, TransCanada Corp.’s Keystone XL pipeline, a $13-billion, 1,661-mile oil pipeline, will traverse the U.S. from the Canadian oil-sands development in Fort McMurray to Montana, North Dakota and Oklahoma to terminate in Gulf Coast markets in Texas. Though the pipeline has met some stiff opposition, it might well prove to be a great source of take-away for producers looking for capacity options throughout the region.

In addition, Enbridge Energy Partners LP is undertaking efforts to support the region with its new Bakken Expansion Program, which is designed to add transport capacity that will help address current and future increases in crude oil production from the Bakken and Three Forks formations. The two proposed projects will provide up to 145,000 bbl. per day of capacity from North Dakota into Enbridge’s mainline at Cromer, Manitoba.

Western region

The western region includes Arizona, California, Idaho, Nevada, Oregon and Washington. It is by far the least developed region in terms of pipeline miles. Slightly more than half of the capacity entering the region is on a natural gas pipeline system that carries product from the Rocky Mountain area and the Permian and San Juan basins.

The largest capacity natural gas pipeline in the region is the El Paso Natural Gas Co. system. While the destination of a major portion of its deliveries is the California border, this system also provides substantial service to customers in Arizona, especially to the natural gas fired electric generation market.

The Kern River Transmission Co. system, which begins at Opal, Wyoming, and extends through Utah and Nevada to Kern County, California, is currently the primary source of supply for the area. The system provides over 80% of the natural gas consumed in southern Nevada.

Notable new construction in the area includes the Ruby Pipeline, a joint effort between El Paso Corp. and Global Infrastructure Partners. The project involves a $3-billion investment in new pipeline infrastructure to connect natural gas reserves in the Rocky Mountain region with growing markets in the western U.S.

The project includes about 680 miles of 42-inch natural gas transmission pipeline, beginning at the Opal Hub in Wyoming and terminating at interconnects in Oregon, with an initial design capacity of up to 1.5 Bcf per day, and will traverse portions of four states, including Wyoming, Utah, Nevada and Oregon.

Midwest region

The Midwest region includes Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin. Traditionally, the principal sources of natural gas for the Midwest have been Texas, Oklahoma, Kansas and Louisiana.

However, the completion of the Rockies Express East pipeline brought transportation of natural gas from the Rocky Mountain area to the Midwest region.

Also, Canadian natural gas pipelines, such as the Enbridge Southern Lights pipeline running through Wisconsin, now account for about 25% of the natural gas pipeline capacity entering the region, according to the EIA. Production from Ohio and Michigan accounts for little more than 8% of the gas consumed in the region.

Michigan is home to the Antrim shale play, which extends into Ohio and Indiana. It is a major source of natural gas in the northern part of the basin, and has been a source of production for many years, producing more than 2.5 Tcf from more than 9,000 wells.

The Midwest includes part of the Marcellus shale play in Ohio, and has benefitted from several pipeline construction projects as a result. In this eastern half of the region, the interstate Dominion Transmission Inc. and Columbia Gas Transmission Co. systems dominate. Each system provides extensive service to affiliated local distribution companies. Both systems essentially are extensions of natural gas pipeline operations that developed historically in Pennsylvania and West Virginia. Additional pipeline projects are expected to roll-out as a result of future shale-play production.

Southwest region

The Southwest region includes Arkansas, Louisiana, New Mexico, Oklahoma and Texas. Most of the major onshore interstate natural gas pipeline companies operating in the region are primarily exporters of the region’s natural gas production to other parts of the country and Mexico, while an extensive Gulf of Mexico and intrastate natural gas pipeline network is the main conduit for deliveries within the region.

More than 56,000 miles of natural gas pipeline on more than 66 intrastate natural gas pipeline systems deliver natural gas to the region’s local distribution companies and municipalities and to the many large industrial and electric power facilities in the region.

Some of the largest and oldest natural gas pipeline systems in the U. S. originate in the Southwest region. In fact, during the 1930s, the first long-distance natural gas trunk line to serve the Midwest region from the prolific Hugoton Basin in the Texas and Oklahoma panhandles was built.

The highly integrated natural gas pipeline network on the Texas Gulf Coast and southern Louisiana is a mixture of both intrastate natural gas pipelines with interconnections to the interstate network that also serve a large domestic natural gas industrial base and a growing natural gas fired electric generation market.

Of all the regions, this portion of the U.S. is most densely covered with transportation pipelines, owing in part to the multiple hubs found throughout this region, and the many producing areas both onshore and offshore.

The area has a web of natural gas pipeline linkages, a number of which have developed around several local natural gas market centers and hubs—the largest being the Carthage, Henry and Egan hubs in eastern Texas and southwestern Louisiana. Basically, natural gas flows are directed either to the east or northward through Mississippi, Tennessee, Kentucky and eventually Illinois and other areas of the Midwest region.

Several of the interstate natural gas pipeline companies using this south-to-north transportation corridor provide shippers and gas traders with transportation links between the three largest natural gas market centers in the U.S.

Although large volumes of natural gas leave the Southwest for other regional markets, significant volumes are still consumed in the region. In 2008, the Southwest region consumed more natural gas than any other region of the country, about double that of the next largest consuming region, the Midwest.

About 33% of the nation’s gas is consumed in the Southwest, in part owing to the region’s high industrial demand for natural gas, which developed over the years due to the ease of access to the many prolific natural gas production fields in the region.

The extensive intrastate natural gas pipeline network in the Southwest provides much of the transportation services between the regions’ producing basins and the interstate network of exporting natural gas pipelines.

In recent years, the expanding development of natural gas resources in the Barnett shale in the Fort Worth Basin in Northeast Texas, as well as in the Bossier formation and Haynesville shale that extend from the Texas and Louisiana border to north Louisiana’s Perryville area, has supported the installation of several new pipeline and infrastructure additions.

Also, several expansion projects on the way for production areas near the Eagle Ford shale play in West Texas, which has garnered local producer’s attention for its production versatility and liquids-rich-gas benefits.

For example, Enterprise Products Partners LP announced four new construction projects to increase capacity in multiple areas. Also, Energy Transfer Partners LP has plans for a 400 MMcf per day Eagle Ford mainline project in Dimmitt County, Texas.

Southeast region

As many as 23 interstate, and at least eight intrastate, natural gas pipeline companies operate within the Southeast region, which includes Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee. Of those, 15 interstate natural gas pipelines originate in the Southwest and receive most of their supplies from the Gulf of Mexico, Texas or Louisiana.

By capacity level, the largest natural gas transporters in the region are the Transcontinental Gas Pipeline Co. system, Tennessee Gas Pipeline Co., Texas Eastern Transmission Co. and Texas Gas Pipeline Co.

New construction for this region includes Southern Natural Gas Co.’s new interstate natural gas pipeline, the Elba Express, which originates from an interconnection with Southern near Port Wentworth, Chatham County, Georgia, to an interconnection with Transco Pipeline on the east and west sides of the Savannah River in Anderson County, South Carolina and Hart County, Georgia.

The pipeline consists of about 190 miles of 42-inch and 36-inch diameter pipeline. Additional compressor stations are expected to be constructed sometime in 2014 or 2015 to increase capacity for the pipeline.