Over the next three years, the Marcellus Shale region can expect to see about 17 pipeline projects meant to ship about 17.3 billion cubic feet per day of natural gas out of Pennsylvania, West Virginia and Ohio to end-users, according to IHS Energy.
Those destinations “are varied, and in addition to New England, some are targeting the Midwest, eastern Canada and the South,” said Matthew Piatek, associate director of North American natural gas for IHS, which tracks energy markets.
“Given the amount of production in the tri-state area currently, it will be able to satisfy the lion’s share of Mid-Atlantic and New England demand and still export a net amount of natural gas,” Mr. Paitek said.
The new infrastructure is in high demand. As natural gas production ramped up in the Marcellus and Utica regions, the existing pipeline network to take that fuel from well sites to market has been maxed out.
That has led to a supply glut and to depressed natural gas prices in Pennsylvania, even as neighboring New England and New York weathered dramatic natural gas price spikes during high-demand winter months.
“There will be significant relief with the buildout happening this year,” said Lindsay Schneider, principal analyst with Wood Mackenzie’s natural gas team.
Still, next summer could look a bit different from this one as low natural gas prices prompt drillers to pull back production, Ms. Schneider noted. Between 2014 and 2015, Wood Mackenzie estimates supply growth of about 2.1 billion cubic feet per day (Bcf/d) from the Marcellus. In 2015-2016, that is expected to fall to about 1.8 Bcf/d.
But even with a slowdown, production is expected to grow, Ms. Schneider said.
“The supply growth will have to catch up with pipeline capacity later this decade,” she said. “That’s very different than now, where exit capacity has to catch up with supply.”
Waves of pipeline projects
Since the early days of Marcellus production — Range Resources was the first to begin producing natural gas from the shale formation in 2005 — pipeline projects have evolved.
One change is in who is driving demand for more pipelines. Now, more end-users are signing up to get the gas, rather than drillers pushing for the projects, said Mr. Piatek.
“That’s been one of the areas we expect to see major growth in demand, particularly for LNG exports from the Atlantic and Gulf Coast areas, new gas-fired generation in the Southeast, as well as an appetite for [local distribution companies] through the Midwest,” Mr. Piatek said.
Traditionally, natural gas pipelines have flowed from historic production areas in the south to the northern states.
When the Marcellus entered the picture, one of the first phases of pipeline expansions was improving access to those interstate pipelines, Mr. Piatek noted.
Those were relatively small-scale, less capital intensive projects — including adding compression to allow more gas to flow through the steel or modifying existing pipelines. Then came projects to reverse the flow of pipelines as Pennsylvania natural gas drilling outpaced that of other parts of the country.
One such project was the 1,698-mile, 1.8-Bcf/d Rockies Express Pipeline, which was built to take natural gas from Colorado and Wyoming to eastern Ohio in 2009. In 2014, the pipeline was reversed to also allow gas from the Appalachian Basin to reach Midwest markets.
“The flavor of the year last year was the year of the turnaround — to reverse the flow of the pipeline,” Mihoko Manabe, senior vice president at Moody’s Investor Services, said. “But those projects were still of the brownfield variety.”
Now, more greenfield projects are in the works. Moody’s expects the wave of construction to crest around 2017-2018, with “the huge, billion dollar projects,” Ms. Manabe said.
“This is a once-in-a-lifetime construction cycle,” she said. “Once the infrastructure is built, the activity will die down. That’s why there is so much frenetic activity in pipeline development.
“If you don’t seize the moment now, a competing pipeline will build the way out.”
The scale is significant in terms of the country’s natural gas infrastructure, she added.
“The Marcellus is re-plumbing the gas flows of the eastern half of the U.S. in a big way,” Ms. Manabe said.
Stephanie Ritenbaugh: firstname.lastname@example.org or 412-263-4910.