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Rays of hope

World Pipelines,

A combination of new plays, new basins and growing demand is helping support a banner year for the US pipeline sector. “Overall, we foresee a bright future for natural gas and pipelines,” says Don Santa, President of the Interstate Natural Gas Association of America. “It is going to be a bigger part of the energy portfolio.”

Unconventional natural gas is leading the parade. El Paso recently completed its 680 mile, 42 in. Ruby pipeline to transport Rocky Mountain tight sand gas from Opal, Wyoming, to an interconnect in Oregon.

But it is shale gas that is generating most of the pipeline action. The dense black rock filling many of the basins around North America is full of natural gas, but low reservoir permeability has previously stymied attempts to produce it. Recent advances in horizontal drilling and hydraulic rock fracturing techniques, however, have allowed petroleum companies to tap into this vast resource. IHS CERA, a consultancy, now reckons that natural gas reserves and resources in North America exceed 3000 trillion ft3; of that, shale gas makes up 1200 trillion ft3 in the US and 500 trillion ft3 in Canada. In Texas, production from the Barnett Shale, which pioneered the play, has plateaued at approximately 5 billion ft3/d. Other shale plays are rapidly emerging; however, creating a need for new capacity.

Almost 200 rigs are currently drilling the Eagle Ford shale play in south Texas. Enterprise Products Partners (EPP), which is currently constructing the 300 mile, 600 million ft3/d south Texas gathering system, recently announced that it is adding a further 62 mile of 30 in. pipe and 300 million ft3/d capacity. The expanded system is expected to enter service in 2013.

BENTEK, a consultancy, estimates that the Marcellus shale gas production in Pennsylvania and adjacent states could reach 8.5 billion ft3/d by 2013, generating a need for 5 billion ft3/d of new pipeline capacity in the northeastern US market. El Paso subsidiary Tennessee Gas Project recently completed the 300 Line Project expansion in the region, bringing total capacity to 1.5 billion ft3/d. Plans have been filed for further additions.

Enbridge and Veresen announced plans for a 124 km line to connect up gas production associated with the Bakken shale oil play of North Dakota. The Tioga Lateral, expected to enter service in 2013, will move up to 120 million ft3/d of liquids rich gas to the Alliance mainline.

Mid-stream companies are also scrambling to transport a new, related resource to market. EPP has proposed an ethane pipeline system that would collect up to 125 000 bpd from Pennsylvania, West Virginia and Ohio and transport it to ethylene petrochemical plants in the Gulf Coast. Chesapeake Energy has already committed 75 000 bpd supply for the 1230 mile system, which will be a mix of existing lines, new build and reversals. EPP is also looking to build the Texas Express Pipeline (TEP), a new, 580 mile NGL line from Carson County, Texas, to storage facilities in Mont Belvieu, Texas. Producers in west and central Texas, the Rocky Mountain States, and Oklahoma are expressing interest; the line would have an initial capacity of 280 000 bpd, with the ability to expand to 400 000 bpd.

Oil lines

On the liquids side, the expansion of two unconventional crude sources is necessitating major new lines. The North Dakota Department of Mineral Resources projects that production from the Bakken formation could reach 700 000 bpd in the next four to seven years. Plains All American Pipeline recently announced it will spend US$ 200 million to build a new crude line to service the production; the 103 mile, 12 in. pipe will carry up to 75 000 bpd to a main line in Saskatchewan.

The oilsands in northern Alberta is one of the largest crude reservoirs in the world, with almost 2 billion bbls of bitumen (over 170 billion bbls of recoverable) trapped in sand and carbonate rock. In order to deliver increased oil production from the oilsands to the US Midwest market, Enbridge completed the Alberta Clipper in 2010, a 36 in. crude oil pipeline delivering 450 000 bpd from Alberta to Wisconsin. TransCanada Corp. also brought its Cdn$ 5.2 billion Keystone pipeline on line in 2011. The 3500 km system carries up to 590 000 bpd from Alberta to the massive tanker hub in Cushing, Oklahoma.


However, the Cushing hub has now become glutted with oil, and production is facing discounts of over US$ 20/bbl. In order to prevent future bottlenecks to oilsands production, TransCanada is proposing Keystone XL, a 1700 mile pipeline that will transport up to 800 000 bpd directly from Alberta to the Gulf Coast. Environmental critics are vehemently opposed to the project; however, citing that it would transport ‘dirty oil’. Nebraska state officials are worried that the line might pollute the Ogallala aquifer, an important source of fresh water. Activists chained themselves to the White House fence, trying to convince President Obama to veto the plan. “Keystone XL is unique because it is an import pipeline, and is subject to Department of State approval, and has an elevated profile,” says Santa. “Also, it has an enlarged symbolic importance in the minds of many environmental proponents that has eclipsed the debate in the eyes of some.”

As a result of political and environmental pressure, a decision date on the Cdn$ 7 billion Keystone XL pipeline has been delayed until 2013. As an alternative outlet, Enbridge is promoting the Northern Gateway pipeline, which would transport 525 000 bpd of bitumen to a marine terminal in Kitimat, British Columbia, and on to markets in Asia Pacific. The line has also drawn the wrath of environmental and aboriginal groups concerned with oil spills on land and water, and its future may also be delayed.

Rays of hope

On a more positive note, federal lawmakers of all stripes are co-operating to reauthorise legislation covering pipeline safety. In October, the Senate unanimously approved a bill, and two bills referred to the floor in Congress are moving toward a final version that can be submitted for White House approval. “There have been several common themes, including the expanded scope of integrity management, looking at maximum operating pressures of older pipes operating in high consequence areas, and state laws regarding limits on third party damage to pipelines,” says Santa. More importantly, the reauthorisation is seeing support from industry, safety advocates and the administration.

Transportation companies are also looking for ways to end the stalemate over Keystone XL. In a move that does not require Department of State approval, Enbridge purchased the Seaway Crude Pipeline Co., a 150 000 bpd crude line running 500 miles from the Gulf Coast to Cushing, Oklahoma. Enbridge and its partner EPP intend to reverse the flow on the line by mid-2012 in order to relieve bottlenecks in the Cushing terminal region. Enbridge and partner EPP also have plans to boost capacity to 400 000 bpd by 2013.

The future

The future of the pipeline sector looks rosy on several fronts. INGAA estimates that an average of over US$ 8 billion in new-build and infrastructure investment will be needed to handle expansion of shale gas alone. “We are confident that industry can do that, as we have seen US$ 8 billion invested per year for the last several years,” says Santa.

This is an abridged version of the full article from Gordon Cope, which was published in the January 2012 issue of World Pipelines, available for subscribers to download now.

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