The Shale-driven Pipeline Future

MaritimeProfessional.com
Thursday, December 12, 2013

Production from U.S. shale plays is expected to continue growing for the next few years, driving stable investment in pipeline infrastructure. The latest edition of the DW North American Pipeline Database identifies $22 billion in expenditure for the construction of over 23,000 miles of pipeline between 2014 and 2020.

Over 1,100 miles of transmission pipelines relate to the transportation of Permian crude and are planned to be built by the end of 2014. These lines will buffer the pricing of Permian crude from temporary disruptions in refineries and in the existing takeaway infrastructure and potentially enable greater volumes of production. The capacity of pipelines to be installed from the Eagle Ford by 2017 actually exceeds expected production and will similarly ensure consumers’ stable supply.

Unlike the Eagle Ford, the Bakken is challenged by its remote location, due to which Bakken oil has historically sold at a discount to WTI and Brent. Over 1,000 miles of pipelines transporting Bakken crude are planned for construction by 2016 and will collectively lower the Bakken discount (which was around $5 lower to WTI for the majority of 2013). A decrease in this discount will also diminish the cost competitiveness of rail (the primary competitor to pipeline transportation). Transportation by rail and natural gas flaring have both grown tremendously in the past several years due to North Dakota’s short construction season, rugged terrain and distance from the Gulf Coast. The extent to which flaring and rail will be replaced by pipelines in the future is debatable.

Given the volatility of energy markets and the steep production decline curves of unconventional wells, the capital cost of pipeline installation for gas transportation is often difficult to justify. The value of natural gas produced from the Bakken is, moreover, dwarfed by that of Bakken oil. About 70% of Bakken oil is transported out of North Dakota by train. Rail infrastructure is both cheaper and faster to build than pipelines, as an extensive network of railroads is already in place in the U.S., and loading and unloading terminals are the only facilities that typically require construction in the transport of crude. Moreover, contractual obligations associated with rail transport are typically only one to four years in length, a fraction of the typical 10-20 year commitments required for shipments by pipeline. Railcars can additionally transport product in both directions and often reach their destinations faster than pipelines. Pipeline operators such as Enbridge are now investing in rail and the relative economics of rail vs. pipeline transport will doubtless be an important determinant of North American pipeline construction activity over the next several years.

The Utica Shale has lagged in production to date, in comparison to other major shale plays, but is expected to see a spike soon, largely due to impending developments in pipeline infrastructure and refining capacity. A joint venture between MarkWest Energy and the Energy & Minerals Group has commenced operations of two processing facilities with a combined 325 MMcf/d of capacity in the Utica since 2012. The joint venture is currently building two more 200 MMcf/d facilities that are expected to be in service by mid-2014. Companies such as Access Midstream and M3 Midstream are additionally building fractionation facilities which will eventually necessitate the construction of Y-grade pipelines. By 2017, the Utica Shale has been forecast to supply approximately 5% of the nation’s NGLs, trailing closely behind the Marcellus at 9%.

The third quarterly edition of DW's North American Onshore Pipelines Database Service (PDS) was issued last week. The database contains a comprehensive, forward-looking list of onshore transmission pipeline installation projects through to 2018, along with selected historical projects, gathering lines and overview analysis.
 

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter May 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Offshore

EU Ships in Libyan Waters Would Undermine Tripoli Govt

The U.N.-backed government in Libya has not invited European ships into its territorial waters to help stop people smuggling because this could harm efforts to

Mothballed Vessels SE Asia Reflect Oil Slump Pain

Around 1,300 offshore support vessels lying idle worldwide. Not everyone in shipping is bemoaning the industry's worst crisis in living memory: a cluster of

Mermaid Maritime Bags Subsea Contracts, Delays Newbuilding

Thailand’s Mermaid Maritime said it has been awarded a number of subsea contracts in the Middle East with a total worth of $11million.   It has also reached

Energy

Mothballed Vessels SE Asia Reflect Oil Slump Pain

Around 1,300 offshore support vessels lying idle worldwide. Not everyone in shipping is bemoaning the industry's worst crisis in living memory: a cluster of

Asian Traders Unload Floating Gasoline as Market Flips

Gasoline shifted from tankers to landed storage or sold off; forward gasoline prices to flip to backwardation from July. The number of tankers storing gasoline

Bulgaria, Greece to Consider Greek LNG terminal

Bulgarian state energy holding company BEH and Greek natural gas company Gastrade have set up a joint task force to prepare a proposal to build an off-shore liquefied

News

Kvichak Delivers for the NYPD

Kvichak Marine Industries informs it continues to expand production of its high performance vessel line with delivery of another Response Boat - Medium Commercial   Kvichak,

Seaway Stakeholders File Suit Against US Coast Guard

Ports and vessel operators challenge what they call “flawed pilotage fees”   A coalition of U.S. Great Lakes ports, vessel operating companies and maritime trade

Royal Caribbean Selects Quintiq Software

Quintiq, a Dassault Systèmes company, announced that Royal Caribbean Cruises Ltd. has selected its software solution to optimize the assignment of more than 80,

Offshore Energy

Mothballed Vessels SE Asia Reflect Oil Slump Pain

Around 1,300 offshore support vessels lying idle worldwide. Not everyone in shipping is bemoaning the industry's worst crisis in living memory: a cluster of

Bulgaria, Greece to Consider Greek LNG terminal

Bulgarian state energy holding company BEH and Greek natural gas company Gastrade have set up a joint task force to prepare a proposal to build an off-shore liquefied

Trim Optimization – Saving Fuel on Offshore Supply Vessels

A joint development project (JDP) between DNV GL, Statoil and Farstad Shipping has demonstrated that offshore supply vessels (OSV) can save up to 21,000 Euros on their annual fuel bill,

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Navigation Offshore Oil Pipelines Pod Propulsion Port Authority Ship Electronics Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.0934 sec (11 req/sec)