Growth Here and on the Horizon

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Last winter was a bear, especially in the Midwest and Northeast. New England was particularly affected as demand for natural gas for heating and power generation created a bottleneck that constrained pipeline capacity. In this issue, we present our quarterly pipeline project report focusing on U.S. natural gas projects, and it’s clear that the deep freeze of 10 months ago has yet to thaw. But help is on the way.

Over the next five years, a spate of projects will help infuse the densely populated Northeast with increased natural gas pipeline capacity. According to a report released Oct. 28 by the engineering firm Black & Veatch, severe gas shortages over the winter “has broken the logjam and forced recognition that the region needs more capacity.” According to the company’s third annual “Strategic Directions: U.S. Natural Gas Industry” report, more than 1,100 MW of New England area coal and nuclear generation capacity is scheduled to go offline by 2017 as new gas-fired plants are put into service.

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“Although the United States has a glut of natural gas supply, the inability of the infrastructure network to get gas to burner tips due to a lack of pipeline capacity led to severe pricing challenges,” the report states.

However, it appears that the market has shifted in the last year. Black & Veatch reports that pipeline owners have “experienced a nearly 180-degree turnaround from one year ago when capacity was underutilized, capital was underperforming and convergence was undefined.” In the company’s 2013 report on the industry, many natural gas pipelines were not consistently earning their allowed rate of return and investors were cautious about committing capital to expand capacity.

“Today, demand for pipeline capacity out of the Marcellus and Utica shale plays has completely reversed the natural gas transportation paradigm,” the report states. Furthermore, the use of shale gas is also redirecting gas pipeline flows, changing how pipelines sell and operate their capacity, and abundant supplies have also shifted how markets view and use natural gas.

Companies such as Kinder Morgan, Spectra Energy and Williams are all considering major pipeline expansions and modifications to address these capacity concerns in
the Northeast.

But these are not the only high growth areas for oil and natural gas pipelines. As you will learn from our cover story, the Bakken shale has transformed the rugged small town of Williston, North Dakota, into a blooming city with a number of infrastructure projects and real estate development initiatives designed to handle the rapid growth stemming from oil drilling in the region. As Williston’s city leaders told our intrepid editor Mike Kezdi, “Don’t call it a boom.” The region is looking at the Bakken as a long-term and sustainable source of economic growth.

As Black & Veatch reports, in the last year, “cautious optimism has been replaced by heightened activity.” As oil and gas development continues to grow in North America, pipelines are sure to follow.

Brad Kramer
Managing Editor
bkramer@benjaminmedia.com
Twitter: @NAOGP1

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