Shale gas pipeline potentialThis week I read a Bloomberg article on Energy Transfer Chairman and CEO Kelcy Warren, who credits the recent oil price crash with boosting his business. On the tail of the fracking boom, the oil bust made a lot of onshore gas pipeline companies meeker and dampened the mood somewhat. Standard & Poor’s pipeline industry index fell 18% from July 2014, and has only recently seen improvement. But Warren’s happy perspective is: “All of our competition vapourised”.1 With Energy Transfer cleaning up in North Dakota and Enterprise Products announcing long-term agreements for its Permian and Eagle Ford shale pipeline network, let’s look at other countries that could stand to offer similar shale successes.
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China has opened new shale gas pipelines this month, with both CNPC and Sinopec working to meet government targets. Sinopec’s Fuling-Wangchang pipeline now connects the Fuling shale operations to the company’s existing Sichuan-East China pipeline network, which sends gas east. The Fuling-Wangchang pipeline is China’s first high capacity shale gas pipeline and will transport 6 billion m3/yr, ramping up to 10 billion m3/yr by 2017. For it’s part, CNPC has brought three shale gas pipelines online since April 2014, the most recent being a pipeline from its Wei 202 well in Sichuan province. The first two pipelines have already transported 250 million m3 of gas and all three together will move some 7 million m3/d by the end of 2015. But China’s Ministry of Finance announced in April that it will be stepping down shale gas subsidies over the next five years, to reflect expectations that new technologies will bring down costs in this sector. It’s a kick to those who would like every investment possible in order to develop a shale gas system to rival the US. Sinopec has said it cannot break even on shale production without subsidies and CNOOC has recently shelved a shale development project. CNPC is reported to have scaled back shale ventures with Shell in China.
In Mexico, big plans are afoot for pipelines, as the country unlocks its natural gas supplies, which include shale formations. Since last year’s legislative reform of energy policies under new President Enrique Pena Nieto, which will break Pemex’s monopoly and open up the country to outside investment, pipelines have been high on the agenda. Director of Mexico’s Comision Federal de Electricidad (CFE) Enrique Ochoa Reza has told press that the CFE is promoting the construction of new gas pipelines, in an effort to substitute the use of fuel oil. He has promised a 75% increase in the number of miles of natural gas pipelines in Mexico by the end of President Nieto’s administration. There isn’t a timeline for shale contracts yet, but things are moving. Mexico is set to steadily develop its pipeline infrastructure for import from US shale reserves, at the same time as working on its own network of shale production and pipelines. Its shale reserves will of course be more effectively mined if it borrows US technologies such as horizontal drilling, fracking, geosteering and new sensors placed directly onto drilling columns.
Over to Australia and the vast shale resources in the Northern Territory: here, the McArthur basin (which covers 40% of the NT) is expected to hold over 200 billion ft3 of gas. International interest is high, with Statoil, Hess Corporation, Chevron, American Energy Partners and many others vying for exploration permits. Exploration interest is being further fuelled by a proposed gas pipeline that would link the NT with the eastern Australian gas grid. Final proposals are due for the North East Gas Interconnector pipeline by the end of the year, when the preferred pipeline builder will be chosen from four potential parties (APA Group, Duet Group, Jemena and Pipeline Consortium Partners Australia). The LNG industry will also benefit from increased natural gas production.
Be sure to pick up next month’s issue of World Pipelines for a North American shale pipeline report.