Faced with 7 Bcf/d of new Marcellus production over the past couple of years and possibly another 10 Bcf/d of production growth coming from the Northeast region between now and 2017, the interstate pipeline companies that traditionally delivered natural gas to the Northeast from outside the region have found it necessary to completely o reconfigure their assets. In effect, gas supplies that traditionally have originated from the Gulf Coast are being displaced by Marcellus production. The resulting pipeline projects are expanding capacity and redirecting flows to provide new shippers with competitive access to existing markets. Today we look at the types of pipeline projects going on and then zero in on Tennessee Gas Pipeline.
As we discussed in the introduction to this series (see Déjà vu All Over Again) the growth of oil & gas production in the Marcellus and soon Utica Shales has triggered a huge amount of related infrastructure development to support it. This and several follow up posts in the series will focus on the specifics of interstate natural gas pipeline projects coming on stream over the next several years. These projects were conceived and developed years ago (see As Time Goes By) with commitments from shippers to pay for the reservation of that capacity on a long-term basis. While some of the interstate projects we will address may perform a gathering function through a shipper that is an affiliate of the pipeline, the typical smaller intrastate gathering systems will not be addressed in this series. Today’s post will focus on Kinder Morgan /Tennessee Gas Pipeline’s projects.
There are three types of interstate pipeline projects, described below:
- The first and most common involve the expansion of an existing pipeline to add capacity in order to connect with another interstate pipeline. Capacity can be added by either (a) adding additional compression to boost pressure and therefore throughput, or (b) adding a new pipeline side-by-side the existing pipeline (i.e, in the same corridor or ditch) and tied in to operate as one pipe – a procedure known as looping. The mix between pipeline loop and compression is a project design issue that can be driven by economics and future expandability plans. Both approaches add pipeline capacity thus enabling delivery into another pipeline and access to additional gas buyers holding capacity to their market. In the case of Marcellus production, this is the most common type and illustrated below in our discussion about Tennessee Gas Pipeline’s projects. Since the growth in market demand is quite modest and much less than the production growth, most projects today are supply driven allowing producers to transport their gas to points where it can be sold to existing transportation contract holders linking different interstate pipelines.
- The second project type is similar but has the characteristic of being dedicated to a more specific market. It usually involves contracts for transportation downstream of a specific pipeline interconnect or a liquid pricing point to specific city gates for delivery into and subsequent distribution by a Local Delivery Company (LDC), or gas utility Gas utilities usually like to control the “last mile” of pipe to their city gates for security and commercial reasons, and will usually purchase gas at upstream liquid points or the interconnects of multiple pipelines.
- The third type of project involves greenfield construction of a new pipeline where no corridor previously existed. This type of project is usually driven by economics to overcome major bottlenecks or to reach markets not accessible from the existing systems. All three of these project types are being developed/constructed in the Northeast today.
