North American, International Pipeline Construction Remains Strong

Demand for natural gas both in North America and the rest of the world is helping fuel pipeline construction worldwide. This is reflected in Underground Construction’s latest worldwide survey figures that indicate 125,458 miles of oil and gas pipelines are under construction and planned. Of these, North American projects account for 40,382 miles of new and planned pipelines while new and planned pipelines in the international sector total 85,076 miles. Just how many of the proposed pipelines will actually be built is highly speculative as several unpredictable factors will drive final decisions.

North American construction

The Energy Information Administration’s Natural Gas Year In Review 2008 report notes that in 2008 at least 84 natural gas pipeline projects were completed in the Lower 48, adding close to 4,000 miles of natural gas pipelines and about 43.9 Bcf/d of new capacity to the national pipeline grid, at an estimated expenditure of $11.6 billion. These figures represent a three fold increase over 2007 when $4.2 billion was spent on laying 1,674 miles of new pipeline while adding 14.9 Bcf/d of new capacity to the network.
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According to the report, the scale of the natural gas pipeline projects completed in 2008 was also exceptional. The capacity addition for 15 of the projects exceeded 1 Bcf/d, the largest being 2.6 Bcf/d. The average added capacity per project overall was 522 MMcf/d compared with only 290 MMcf/d in 2007, which was the second largest construction year in the last 10 years.

The report notes that 65 of the projects involved expansion of the interstate natural gas pipeline network, representing 34.2 Bcf/d of new capacity. The remaining 19 projects improved capacity and transportation service on intrastate natural gas pipelines (9.9 Bcf/d). More than one third of the projects attempted to satisfy a growing need for additional natural gas pipeline capacity to support transportation of new natural gas production to regional markets, adding 16.3 Bcf/d of pipeline capacity overall. Such projects were concentrated in the expanding natural gas production areas of Wyoming, western Colorado and in the Barnett Shale formation of northeast Texas.

The report also states that about 11 percent of all newly added natural gas pipeline capacity for 2008, or 4.6 Bcf/d, is attributable to new intrastate pipelines built to transport expanding Barnett shale production to local markets and to interconnections with the interstate natural gas pipeline network. In turn, several major interstate pipeline projects were also constructed to continue the flow of this natural gas beyond east Texas to interstate pipeline interconnections in Louisiana, Mississippi, and Alabama. These projects included the new Southeast Supply Header Pipeline (Louisiana to Mississippi), the new Gulf South Southeast Extension (Mississippi to Alabama) and the Gulf South Texas to Mississippi Expansion, which added more than 4.1 Bcf/d to the natural gas pipeline network in the Gulf Coast region.

Also found among the major natural gas pipeline additions of 2008 were several large capacity pipelines built to link the interstate natural gas pipeline network to several LNG import terminals that were newly commissioned or expanded during the year. Such projects accounted for 10.9 Bcf/d of new natural gas pipeline capacity, or about 24 percent of total new capacity. Accounting for another 8.5 Bcf/d, or 19 percent of new pipeline capacity, were nine major bidirectional header systems built to support new natural gas underground storage facilities.

As to the largest natural gas pipeline project completed in 2008, which was not associated with an LNG import or underground storage facility, was the 1.5 Bcf per day, 720 mile, REX Pipeline system. Commencing at the Cheyenne Hub in northeastern Colorado and terminating in eastern Missouri, this pipeline was constructed principally to link the expanding natural gas production of Wyoming and western Colorado to midwestern markets, and to eventually extend to markets in the northeastern United States (in 2011).

The western leg of the Rockies Express (REX West) Pipeline came online January 8, 2009, connecting the Rockies region with the Midcontinent region. After its opening the 713 mile REX West has operated at near capacity.

A portion of REX East, the third phase of the REX project, from Audrain County, MO, to the Lebanon Hub in Warren County, OH, began service on June 29, 2009. The remainder of the 639 mile, 42 inch diameter REX East pipeline eastward to Clarington, OH, is expected to begin service by November 1, 2009.

As to the outlook for North American construction in 2009, the EIA report finds that the inventory of proposed pipeline projects reflects a potential addition of about 35.4 Bcf/d of natural gas pipeline capacity during 2009, about 19 percent less than 2008. While the completion of all these projects is remote, 2009 will likely be the second largest year for natural gas pipeline construction in this decade.

As to specific figures, North America currently accounts for a total of 32,890 miles of planned pipelines and 7,492 miles of pipelines in various stages of construction in the U.S., Canada and Mexico.

International construction
On the international scene, Underground Construction’s latest figures indicate 25,433 miles of oil and gas pipelines in various stages of construction at this time. This year’s planned pipeline mileage totals 67,135, bringing construction and planned pipeline mileage in the international sector to 85,076.

With the demand for energy growing faster in the Asia Pacific region than anywhere else in the world, it is not surprising that the region also accounts for the highest number of new and planned pipeline projects, which currently total 36,133 miles. Of these, 26,848 miles represent projects in the engineering and design phase, while 9,295 miles account pipelines in various stages of construction.

Supporting strong growth in Asia Pacific energy consumption is the U.S. Energy Information Administration’s International Energy Outlook (IEO2009). According to the report, in 2008 the Asia Pacific region accounted for 87 percent of the world’s energy consumption growth. Although the region’s natural gas consumption was below average in 2008, Chinese consumption grew by 15.9 percent, and accounted for the largest incremental growth in world gas consumption.

Here are international construction and planned pipeline mileage totals by area: South and Central America and the Caribbean, 13,526; Asia Pacific, 36,133; Africa, 6,253; FSU and Eastern Europe, 18,797; Middle East, 6,232; Western Europe and European Union, 4,135.

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