Pipeline Activity May Slow But Won’t Be At Crawling

Considering negative reports on the nation’s economic status, pipeline construction in the U.S. is experiencing a healthy market as operators and producers continue stepped-up activity supported by projects to move natural gas to the Midwest and the East Coast from Mid-Continent shale plays and the Rocky Mountains.

While construction is expected to be slightly slower than in recent years, activity remains at a high pace with projects that are either under way or will kick off in 2009. In essence, the industry is not expected to be wandering through pipeline wilderness over the next few years.

Surveys published in P&GJ and sister publication Pipeline News indicate natural gas, crude oil and refined products pipelines under way, or planned for construction in the U.S. through 2012 total more than 27,000 miles. This mileage is anchored by pipeline projects focused on moving Rocky Mountain gas and unconventionally produced shale play natural gas to large customer markets.

Natural gas activity continues to dominate construction and engineering work, accounting for more than 17,000 miles of cross country pipeline projects. Driving this activity is a steady demand for gas-fired electric power generation, and to a lesser extent, industrial, commercial and residential use.

Of the natural gas totals, some 40 projects representing nearly 5,000 miles are scheduled for completion this year, although final regulatory approval dates will affect schedules. This mileage includes projects originally scheduled for 2008 completion that have slipped into 2009. Some operators are still waiting on permits before making firm commitments for 2009 while others are evaluating economic conditions before deciding whether to move forward.

It is interesting to note that the combined natural gas, crude oil and products pipelines now on the books represent 75 separate projects. Of this total, 58 of these cross country pipelines are designed for 30-inch or larger with 42-inch being the diameter of choice to meet capacity requirements. While this indicates a significant level of construction activity, some proposals are competing for the same markets and will fade or become joint efforts.

For comparison, the U.S. Energy Information Administration (EIA) issued a report last year noting some 200 projects, representing more than 10,000 miles of new pipelines and 103 Bcf/d of capacity, are under study, planned or have been approved by federal regulatory agencies. Based on every project reaching completion, these lines would add about 2% of new pipeline miles to the national grid and increase network capacity by 38% at a total cost of $28 billion.

It is important to note the EIA totals represent cross-country lines, as well as short sections, and interconnects, for the period from 2008-2010. The mileage total is 4,407 miles in 2008, 3,696 miles in 2009 and drops to 1,955 in 2010.

Staying On Track

With no official reports of operators deferring projects, it is anticipated that pipeline companies will remain on track with construction plans, particularly those projects set for early 2009 construction starts. However, companies will continue to evaluate the price stability, the tight credit situation and material costs before red-penciling projects.