While pointing to Hurricane Harvey as the reason for some ambiguity concerning oil prices in the short-term, recent Energy Information Administration (EIA) projections have trended favorably for the pipeline industry in the coming year.
In fact, with many Gulf of Mexico platforms already back in operation, U.S. crude oil production should average 9.3 MMbpd by the end of 2017 and 9.8 MMbpd in 2018 – the highest annual mark in U.S. history. That would surpass the record of 9.6 MMbpd from 1970, EIA said in its Sept. 12 Short-Term Energy Outlook (STEO).
Moreover, Brent crude prices are expected to rise to $52 a barrel in 2018, while West Texas Intermediate (WTI) will average about $2 less. Additionally, natural gas production is forecast by EIA to average 73.3 Bcf/d by the end of the year – a 1.4 Bcf/d increase from 2016 – with production in 2018 forecast to be 4.4 Bcf/d more than 2018.
“If all goes smoothly, 2018 will likely be a banner year for pipeline construction,” said Cathy Landry, vice president, Communications, of the Interstate Natural Gas Association of America (INGAA). “A lot of projects are getting close to final decision by FERC (Federal Energy Regulatory Commission), which means that operators and contractors could be working full out next year.”
Landry’s assessment of the coming year is supported by energy analysts at PointLogic Energy who confirmed 31 projects in North America that are on track to be in-service by year-end. All together, these will account for about 14 Bcf/d of natural gas. (See, Fall Will Be Busy Season for Pipeline Projects, page XX).
PointLogic said central to the growth will be Appalachia, where over one-third of the projects cited – Rover and Atlantic Sunrise among them – will provide transportation gas out of the Marcellus and Utica shales. Meanwhile, other projects are already using gas locally in producing areas for more localized needs, with several other such projects coming into service in 2018 and 2019. For example, the 200,000 MMcf/d Collierville Expansion, is designed for gas-fired operations of the Tennessee Valley Authority.
“Pipeline development continues to grow due to expanding oil and gas production in key areas, including the Marcellus and Utica, Permian Basin and the Scoop/Stack plays in Oklahoma,” Paul Moran, associate director at Navigant, told P&GJ. “Over the next year, key developments to monitor include the ongoing battle between FERC and state regulators in the Northeast, in addition to announcements of new projects for oil, gas and NGL pipelines in the Permian and in the Oklahoma Scoop/Stack plays.”
In August, the average Henry Hub natural gas spot price was $2.90 per MMBtu, down 8 cents/MMBtu from the July level. However, anticipated expansion in natural gas exports and domestic natural gas consumption in 2018 contribute to the forecast that Henry Hub natural gas spot price will rise from an annual average of $3.05/MMBtu in 2017 to $3.29/MMBtu in 2018.
That domestic natural gas supply will continue to grow due to the advancement of key technologies that unlock gas production from reservoirs such as shale formations is evidenced by a recent American Gas Association (AGA)-coordinated report. In it, the Potential Gas Committee of the Colorado School of Mines states the United States has a technically recoverable natural gas resource base of 2,817 Tcf yet to be discovered. This is the highest resource evaluation in the Committee’s 52-year history – a 12% increase from the previous high assessment from year-end 2014.
The increasing importance of shale gas in the U.S. is further evidenced by the report’s mean total assessed shale gas resource of 1,797 Tcf for 2016, which accounted for 64% of the country’s total potential resources.
In other words, the potential for an increasing number of new projects exists for the coming year, but so do the trials that will accompany any expansion.
“That, of course, brings challenges, including ensuring there are enough crews to do all the work,” Landry said. “Construction contractors have indicated that they are ready to get to work on the projects, which will bring much-needed natural gas to markets.”
In its Sept. 25 outlook, Moody’s Investors Service pointed to “an expected slowdown” in the pace of earnings growth on the global integrated oil and gas industry following strong earnings recovery in 2017 as a return to “stable, organic growth.”
“The sector’s return to positive free cash flow generation in 2017 will boost the capacity of European majors to reinstate full cash dividends over the next 12-18 months,” Moody’s wrote. “While higher shareholders returns would put a brake on further improvement in credit metric in 2018, the companies can maintain their recovered credit profiles.”
P&GJ 500 Report
Liquids Top 10 – In terms of total deliveries – crude and products (000 bbls) – Plains Pipeline, with 1,422,030, moved ahead of Enterprise Crude Pipeline over the previous year at 949,713. Enbridge Energy, 942,514, moved up a spot to third; Sunoco (938,635) jumped two places to fourth; Colonial fell two spots to fifth; ExxonMobil (677,279) and Marathon (677,137) each moved up one spot to sixth and seventh, respectively; Magellan (666,570) fell three spots to eighth; SFPP (419,250) and LOCAP (401,572), remained ninth and tenth.
Gas Transmission Top 10 – Few changes occurred in terms of miles of pipeline (transmission and gathering) in this section, with DCP (64,000) still number 1. However, Enable Midstream (20,700) moved onto P&GJ’s latest list only one place behind DCP. The other top 10 companies each dropped one place as a result. Third-through tenth-place finishers were: Northern Natural Gas (14,790), Tennessee Gas (11,781), El Paso Natural Gas (10,145), Texas Eastern (9,642), Columbia Gas (9,604), Transcontinental Gas (9,293), Natural Gas Pipeline of America (9,123) and ANR (8,882). Gulf South (7,325), number 10 for 2015, was bumped to twelfth behind Pacific Gas & Electric (7,455).
Distribution Top 10 – The change in rankings among the top 10 distribution companies from last year’s ranking by total gas customers changed little as Southern California Gas retained first-place with 5,900,000 customers. The second and third spots were swapped by AGL (4,586,000) and Pacific Gas & Electric (4,550,000). The remainder of the rankings stayed in the same order from fourth through tenth: National Grid (3,514,949), CenterPoint Energy (3,439,344), Atmos Energy (3,094,540), WEC Energy Group (2,746,667), ONE Gas (2,140,000), Xcel Energy (1,977,000) and Southwest Gas (1,930,000).
How the 500 Report Is Compiled
Pipeline & Gas Journal’s 37th Annual 500 Report features the industry’s most comprehensive listing of U.S. energy pipeline systems. As with past years, it ranks the nation’s gas distribution, gas transmission and liquids pipelines companies.
Gas distribution companies are listed by number of customers. Gas transmission companies are listed by miles of pipe and liquids pipelines by total of crude oil and products delivered.
Additional statistical data for the report are based on operating revenues, gas sold, total throughput of natural gas, product deliveries and miles of mains and service lines. About 90% of the data is based on information from calendar year 2016, completed through direct company contacts and statistics collected from FERC. Other data is taken from individual companies’ annual reports and P&GJ research.
Every effort is made to ensure that each company’s information is accurate, but some companies no longer have to report statistical data to FERC, while others did not respond to our inquiries. As a result, some of the data are based on the latest figures available. In the event your company’s information needs to be revised, let us know as soon as possible. We also need to know of any changes of address, contact information, mergers and acquisitions.