CERAWeek (by IHS Markit) is held each year in Houston, Texas. There is no doubt it is the world’s premier energy event. Last week U.S. Secretary of State Mike Pompeo addressed attendees, as did Secretary of Energy Rick Perry and the Chairman of the Federal Energy Regulatory Commissioner Neil Chatterjee. Movers and shakers. Everyone from Saudi Arabian oil sheikhs to wildcatting frackers from America’s shale plays were there.
One of the speakers was Kenneth Medlock, senior director of Rice University’s Baker Institute of Public Policy Center for Energy Studies. He had some very interesting comments on pipelines in general, and the Marcellus/Utica in particular.
Medlock said it’s a tough sell, but if we can get new pipelines built into New England from the M-U, that’s the ticket to higher gas prices in our region. How can we overcome resistance and get them built? Medlock says we must “get people on board at the local level.”
Also attending CERAWeek was Blue Jenkins, commercial executive vice president of EQT. Jenkins told a reporter that he is “optimistic” that both Mountain Valley Pipeline (MVP), being built by Equitrans, a former EQT project, and Atlantic Coast Pipeline (ACP) being built by Dominion Energy, will ultimately get completed. Both are facing still opposition from organized Big Green groups who have mounted legal campaigns to stop both projects. MVP is more than 70% in the ground at this point. ACP had only begun moving dirt and stringing pipe when the courts temporarily shut it down.
An update from the now concluded CERAWeek:
As the US gas industry seeks to expand markets for its product, it needs to do a better job of getting local support for infrastructure construction, speakers at CERAWeek by IHS Markit said Wednesday.
This is particularly the case in markets currently underserved by long-haul pipelines, such as New York state and New England, they said.
“I think it starts with public perception, because when you start talking about pipeline development or any kind of infrastructure, such as [electric] transmission lines, you only have to block one square foot and you’ve blocked the project,” Kenneth Medlock, senior director of Rice University’s Baker Institute of Public Policy Center for Energy Studies, said on the sidelines of the conference in Houston.
Medlock said that as the first wave of pipeline infrastructure projects designed to transport Appalachian Basin-produced gas nears buildout, producers are looking to expand into new markets, particularly those in Northeast population centers.
Because prices in the basin remain below those at the Henry Hub, Appalachian producers have until now largely focused on moving their gas to the Gulf Coast to take advantage of the price differential, he said.
“If you can open up that window into New England you’d actually see that price strengthen,” Medlock said. “That’s going to be a difficult sell in the current environment. But that’s certainly where there’s a lot of potential demand pull and you see the widest basis differentials.”
However, in recent years, New York has raised a number of regulatory issues that have effectively blocked the construction of new interstate pipeline to transport gas from the Appalachian Basin to major Northeast gas markets, such as New York City and New England.
Medlock said that to overcome the environmental objections of many communities to infrastructure projects, companies need to improve stakeholder engagement at the local level. “If you get people on board at the local level, then these broader issues don’t materialize,” he said.
If all the pipelines currently proposed to move gas out of the Appalachian Basin are built, “we’re in very good shape for the foreseeable future,” Blue Jenkins, commercial executive vice president of Appalachian producer EQT, said on the sidelines of the conference.
He said he is optimistic that projects such as the 2 Bcf/d Mountain Valley Pipeline, and the 600-mile, 1.5 Bcf/d Atlantic Coast Pipeline will eventually overcome their various environmental and regulatory hurdles and be completed in a timely manner.
The 300-mile MVP, a joint venture of EQM Midstream Partners, WGL Midstream, NextEra Energy, Con Edison Transmission and RGC Midstream, is being constructed to deliver Appalachian Shale gas to Mid-Atlantic markets. Dominion-led Atlantic Coast Pipeline is 600-mile pipeline project to move Appalachian gas to the US Southeast.
NEED REMAINS FOR MIDSTREAM INFRASTRUCTURE
Jenkins said the buildout of the currently planned pipeline projects “carries us out into the early to mid-2020s from a takeaway perspective.” He added that over time, “you may need incremental pipes and you sure might need interconnector pipes” to be built out in the basin.
Midstream and downstream market players are also working to ensure sufficient infrastructure to move gas where it is needed.
“For our load, we have done what we need to do,” Corey Grindal, senior vice president of gas supply for LNG export project developer Cheniere Energy, said on the sidelines of the conference.
To secure sufficient gas supply for its export facilities along the USGC, the company has sponsored the Midship Pipeline project, a 200-mile mainline designed to move gas from the Anadarko Basin in Oklahoma to interstate pipeline connections and on to the USGC and Southeast markets.
“We have adequate gas to our facilities,” Grindal said.
The LNG exporter is in the process of commissioning the seventh of eight liquefaction trains that are currently operating or under construction, he said.*
*S&P Global Platts (Mar 13, 2019) – CERAWeek: Upstream, downstream gas companies agree infrastructure projects are needed
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