pipeline project

Tallgrass Energy and DCP Midstream’s Cheyenne Connector pipeline and the REX Cheyenne Hub Enhancement projects are set to begin operations tomorrow, June 26, after receiving FERC approval yesterday. The natural gas projects will add takeaway capacity out of the Denver-Julesburg and Powder River production basins. For Tallgrass, the incremental capacity has the potential to increase utilization of its Rockies Express Pipeline (REX), which has struggled to fully recontract its mainline capacity after a slew of long-term contracts expired last year. For gas producers, the new capacity and hub upgrades mean an alternative route out of the core DJ with farther-reaching destination options for gas flows, including access to REX and its growing direct-connect load and numerous third-party interconnects in the Midcontinent/Midwest. About 600 MMcf/d in firm contracts will kick in for each project with the start of service, but given that Niobrara gas production is down and there’s likely no new production waiting behind the capacity, gas flows on the two projects may come down to economics. In today’s blog, we provide an update on the projects in the context of today’s uncertain market.

On June 1, Energy Transfer Partners’ new Rover Pipeline began service on its market segment from northwestern Ohio into southern Michigan, effectively sending nearly 800 MMcf/d of Marcellus/Utica gas production to Vector Pipeline and its northern destinations in Michigan, and, by extension, to the Dawn Hub. This latest in-service has already shuffled flows in the region and pushed back on other supplies targeting the same markets, including Canadian gas imports. And that’s even before the project has achieved its full expected capacity of 3.25 Bcf/d. Today, we analyze the early effects of Rover’s first flows to the Michigan/Dawn markets via Vector.

Energy Transfer Partners’ 3.25-Bcf/d Rover Pipeline recently began service on its next phase — Phase 1B — opening up additional natural gas receipt points for its Mainline A and increasing westbound gas flows from the Marcellus/Utica. The project will help relieve takeaway constraints for growing gas supply in the Marcellus/Utica region, while also increasing gas-on-gas competition for supply basins targeting the Ontario and Gulf Coast markets. This latest launch brings the project closer to achieving full completion, which is expected by the end of March 2018, but volumes on Rover are already changing regional flow and pricing dynamics. Today, we provide an update on Rover’s progress.

The gestation period from concept to in-service for a new natural gas pipeline can take at least 3-4 years. A significant number of these projects are underway today in the Northeast US in response to dramatic increases in local production. Today we continue our series on changes in the Northeast with a look at the process required to develop pipeline infrastructure.

In our previous posting we talked about the dramatic changes in strategies, infrastructure and operations in the Northeast resulting from the successful development and growth of Marcellus natural gas production.  Some of these investments by pipelines, and shipper commitments for transportation agreements, are quite sizable and can cause a high degree of angst.  One of the factors that makes this so difficult for everyone is that the timeline for an interstate pipeline to place new capacity into service can typically take three to four years from conception to in-service.  That’s a long time in a dynamic industry and as we have seen, significant changes can take place in that long a period. Before we drill down to the strategic and 'operational aspects, it would be helpful to understand why it takes so long and what is involved in the development process to bring new pipeline capacity on stream.