2016 North American Pipeline Outlook

Underground Construction’s 2016 survey figures of oil and gas pipelines construction indicates 34,027 miles of pipelines are currently planned and under construction in North America. Of these, 21,412 miles represent projects in the engineering and design phase while 12,615 miles are in various stages of construction.

Following is a look at new and planned pipeline miles in the four basic regional groups (see area map) discussed in the following article: United States – 23,090; Canada – 8,734; and Mexico 2,203. For specific information on these and other pipeline projects, see Underground Construction’s sister publication, Pipeline News.

Pipeline outlook

As to the outlook for future pipeline activity, The World Onshore Pipelines Market Forecast 2015-2019 from Douglas-Westwood (DW) considers the prospects for the onshore pipelines construction business and values the future markets through 2019 by key
component, region, pipeline type and diameter.

The report notes that a substantial fall in oil prices since July 2014 has negatively impacted the onshore pipeline market, although project delays are almost exclusively in North America. The pipeline market itself is well-cushioned from short-term commodity price fluctuations with projects typically responsive to long-term demand and supply trends, both within and between regions.

DW expects onshore pipeline expenditure to grow modestly to $220 billion between 2015 and 2019, an increase of 14 percent compared with $193 billion over the preceding five-year period. An increasing volume of pipeline installations is expected in most regions, supported by continued product demand growth in both new and existing population centers, new and increasing hydrocarbon supply and a shift in energy demand preferences towards gas.

The report identifies North America and Asia as remaining the highest volume markets, together accounting for approximately 45 percent of global capital expenditures. However, fastest growth is anticipated in the Middle East. In total, DW expects almost 192,000 miles of line pipe to be installed. This represents an increase of 11 percent compared to the previous five-year period.

United States

U.S. natural gas production is forecast to increase by 44 percent by 2040; however, production is not expected to come from
traditional supply areas. This is because historic supplies from the Gulf of Mexico have decreased 46 percent over the past five years. The new gas that will replace supplies from the Gulf mainly originate from the Marcellus and Utica Shale formations, where pipelines – such as the 250-mile NEXUS Gas

Transmission LLC pipeline – is being constructed in Ohio and Michigan by Fluor Corporation. DTE Energy Company and Spectra Energy Partners LP are the lead developers of the NEXUS Project that is expected to cost approximately $2 billion and deliver incremental production from the Utica and Marcellus Shale plays to meet growing demand for natural gas by distribution and end use markets in the Upper Midwest and Canada. Completion is scheduled in 2017.

Already before the Federal Energy Regulatory Commission is the 711-mile Energy Transfer
Partners’ filing for the Rover Pipeline to move 3.25 Bcf/d of Utica/Marcellus gas to similar markets as the NEXUS Pipeline. Additionally, the Rover Project will include a pipeline segment from the Midwest Hub in Defiance County, OH, area through Michigan to an interconnection with Vector Pipeline, thereby enabling deliveries to additional points in Michigan and to the Union Gas Dawn Hub in Ontario, Canada.
Tennessee Gas Pipeline Company, a Kinder Morgan company, has filed an application with the Federal Energy Regulatory Commission for its proposed Northeast Energy Direct Project (NED).

The approximately $5 billion NED Project will expand TGP’s existing, extensive pipeline system in Pennsylvania, New York and New England, connecting low-cost natural gas supplies from northern Pennsylvania to New York and New England markets.
The NED Project comprises two components, the Supply Path and the Market Path. The Supply Path component will have a maximum design capacity of 1.2 Bcf/d and consists of 133 miles of 30-inch diameter pipeline extending from TGP’s existing 300 Line system in northern Pennsylvania to an interconnection with TGP’s 200 Line system and Iroquois Gas Transmission System, L.P. at Wright, NY; and approximately 41 miles of 36-inch diameter looping pipeline along TGP’s 300 Line in Bradford and Susquehanna counties in Pennsylvania. Market Path will extend 188 miles from Wright, NY, to Dracut, MA, and have a maximum design capacity of 1.3 Bcf/d. The anticipated in-service date for the NED is Nov. 1, 2018.

Sanchez Energy Corp. has entered into a joint venture agreement with Targa Resources Partners to construct a cryogenic natural gas processing plant and associated high pressure gathering pipelines near Sanchez Energy’s Catarina asset in the Eagle Ford Shale. The processing plant, which will be located in La Salle County, TX, is expected to have initial capacity of 200 MMcf/d with the ability to increase to 260 MMcf/d. The natural gas processing plant and 45-miles of gathering pipelines will be designed, built and operated by Targa. Completion is expected by early 20 17.
In late 2015, work was completed on Tall Oak Midstream’s crude oil gathering, storage and transportation system to serve producers in Oklahoma’s STACK play. The system consists of a storage and truck unloading facility east of Okarche, OK, in the center of the STACK play, and a 20-mile pipeline that will provide connection to multiple downstream markets. Ultimately, Tall Oak expects to construct a 210-mile gathering system that will provide wellhead service. To serve customers while the gathering system is under construction, Tall Oak has contracted for a fleet of dedicated trucks that will deliver crude oil from the wellhead to the terminal. The terminal will have an unloading capacity of 16,000 bpd and storage capacity of 20,000 bbls with plans to expand to 70,000 barrels.

The STACK play sits northwest of Oklahoma City and targets the Woodford and Mississippian-age shales. Columbia Pipeline Group, a unit of NiSource Inc., plans two projects to transport natural gas from Marcellus and Utica production areas to markets served by its Columbia Gas Transmission and Columbia Gulf Transmission pipeline systems. The Mountaineer Xpress (MXP) Project calls for approximately 165 miles of various diameter pipeline, three new compressor stations, modifications to three existing compressor stations and one regulating station. The project would provide an additional 2.7 Bcf/d of firm transportation service from the Marcellus and Utica production areas to markets on the Columbia Gas Transmission system, including markets in western West Virginia, TCO Pool and other mutually agreeable points.

Southern Star Central Corp. and NextEra US Gas Assets recently held a binding open season for the Sooner Trails Pipeline. As proposed, the 250-mile pipeline would connect new receipt points in Kingfisher, Canadian, Grady, Stephens, Garvin, Carter, and Bryan counties in Oklahoma to interstate and intrastate pipeline markets in Bryan County, OK, and Lamar County, TX. If a decision is made to move forward, service could begin April 1, 2017.

Dominion Transmission Inc. received FERC approval for its Clarington Project to provide an additional 250,000 Dth/d of firm transportation capacity, which is fully and solely subscribed by Consol Energy Inc. under a 15-year precedent agreement.

The project involves construction of two 10,000-hp compressors at the Mullet Compressor Station in Monroe County, OH, and an additional 6,000 hp of compression at the Burch Ridge Compressor Station in Marshall County, WV. Dominion will receive Appalachian gas from a new interconnect with Consol near Lightburn, WV, and will deliver to two new interconnects in Monroe County, one with Texas Eastern Transmission (TETCO) at TET-Arman Hill and the other with Rockies Express Pipeline (REX) at REXGerman Ridge. Clarington is projected to cost $76.6 million and Dominion expects to meet a 2016 in-service date.

In Texas, the oil and gas segment of Willbros has won a contract to construct a 60-mile, 10-inch diameter cross-country pipeline. The project, to expand capacity on an existing system, begins in Panola County, and ties in to an existing system in Angelina County. Completion is scheduled in the first quarter of 2016.

The Columbia Pipeline Group’s Leach XPress Project involves construction of approximately 160 miles of natural gas pipeline and compression facilities in southeastern Ohio and West Virginia’s northern panhandle. The roughly $1.4 billion investment will enable the transport of approximately 1.5 Bcf/d of natural gas from the heart of the Appalachian supply basin. By connecting production areas to the Columbia Gas Transmission mainline system, the Leach XPress Project will help move domestic natural gas to high-demand energy markets.

Texas-based Energy Transfer Partners is responsible for constructing and operating the 143-mile, 42-inch diameter pipeline which will originate at the Waha Hub outside Fort Stockton, TX, in northern Pecos County. The pipeline will include delivery locations for local towns and utilities in Central West Texas and terminate custody at the U.S.-Mexico boundary near Presidio, TX.

Pumpco is expected to start construction soon with the project to be in service by the end of Q1 2017.Energy Transfer Partners’ affiliate, ETP Crude LLC, held a binding Open Season for the Delaware Basin Crude Gathering Pipeline with a capacity to accept approximately 120,000 bpd of crude oil from receipt points located in Reeves County, TX, and Lea County, NM, for transport to delivery points in Loving County, TX, and Lea County, NM.

This project, when completed, will consist of three separate gathering systems with an aggregate of approximately 130 miles of pipe. The gathering systems will deliver crude oil into the Sunoco Logistics Partners L.P. Delaware Basin Extension. The pipeline is projected to be in service in the first half of 2016.

Precision Pipeline is constructing the 67-mile Stonewall gas gathering pipeline for M3. The pipeline route runs from Doddridge and Harrison counties to Braxton County, WV. Completion is scheduled in early 2016.

Also underway by Precision is the 89-mile West Central Lateral Project for WE Energies that will carry gas from Eau Claire County, WI, to the city of Tomah in Monroe County, WI.

Energy Transfer Partners LP and Regency Energy Partners have awarded contracts for construction of the 533 mile, 24 and 30-inch Lone Star NGL pipeline from the Permian Basin to Mont Belvieu, TX. The project also involves converting Lone Star’s existing West Texas 12-inch NGL pipeline into crude oil/condensate service. The new pipeline is being built to accommodate Lone Star’s contracted NGL transportation volumes that will exceed Lone Star’s existing 290,000 bpd of capacity from the Permian Basin by 2016.

Pumpco Inc. has been awarded a contract for spreads 1-3 and Strike Construction has been awarded a contract for spreads 4-7. The new pipeline and conversion works are expected to be operational by third quarter of 2016 and first quarter of 2017, respectively.

Canada

Not surprisingly, the hot topic throughout North America and Canada in particular, is President Obama’s rejection of TransCanada’s long-awaited Keystone XL pipeline to ship crude oil and diluted bitumen from Alberta’s oil stands to refineries in the U.S. The first three phases of the project have been built. The fourth phase, Keystone XL, calling for a 1,179-mile, 36-inch pipeline to move oil sands from Hardisty, Canada to Steele City, NE, and allow product to be shipped to Texas refineries on the Gulf Coast has proven to be a political fight for much of the Obama presidency.
Following an announcement by Secretary of State John Kerry in mid-November that the controversial project was not in the country’s national security interest, Obama announced from the White House that he agreed.

While TransCanada’s response to the Whitehouse decision is too lengthy to cover in detail in this report, President and Chief Executive Officer Russ Girling expressed his disappointment with the President’s decision saying, “Today, misplaced symbolism was chosen over merit and science; rhetoric won out over reason.

“The U.S. consumes over 7 MMbpd more oil than it produces and will continue to do so for decades, even despite U.S. oil production increases. It is disappointing the administration appears to have said yes to more oil imports from Iran and Venezuela over oil from Canada, the United States’ strongest ally and trading partner, a country with rule of law and values consistent with the U.S.

“Today’s decision deals a damaging blow to jobs, the economy and the environment on both sides of the border.” Despite the disappointment of Keystone XL, Canada accounts for a number of new and planned projects at this time, many involving TransCanada.

TransCanada has been selected by Shell Canada Limited and its joint venture partners in the LNG Canada project to develop the 465-mile Coastal GasLine Pipeline to deliver natural gas from the Montney gas-producing region, near Dawson Creek, B.C., to LNG Canada’s proposed LNG facility near Kitimat, The project involves construction with 48-inch diameter pipe, in addition to the construction and operation of up to three meter stations and one compressor station. The initial capacity would be approximately 2-3 Bbcf/d.

The company also received final permits from the BC Oil and Gas Commission (BCOGC), giving regulatory approval for construction and operation of the Prince Rupert Gas Transmission Project (PRGT). The permits cover the entire 560-mile route from north of Hudson’s Hope, B.C. to Lelu Island, off the coast of Port Edward, near Prince Rupert. The permits approve construction of three compressor stations and a meter station where the gas is to be delivered to the Pacific NorthWest (PNW) LNG facility. The project calling for 485 miles of land pipeline and 68-miles of marine pipeline will connect the natural gas production in the Montney fields of northeastern B.C. with the proposed PNW LNG liquefaction facility on Lelu Island.

Still needed is a positive decision from the federal government under the Canadian
Environmental Assessment Act, 2012. Once approval is received, right-of-way clearing, with start-up of pipeline construction activities will follow shortly.

Meritage Midstream Services’ Canadian affiliate, Meritage Midstream Services III, LP, has entered into definitive agreements with Canadian International Oil Corporation to build natural gas gathering, compression and processing assets and crude oil gathering assets to support the development of CIOC’s Montney and Duvernay shale positions in west-central Alberta. Meritage III will provide 75 MMcf/d of gas gathering and processing capacity, which will be expandable to 225 MMcf/d, and up to 10,000 bpd of crude oil gathering capacity.

Construction of both systems began in May. The 26-mile high-pressure gas gathering system will deliver rich gas to the new processing plant, which will be located approximately 60 miles south of Grand Prairie, Alberta. The plant is expected to come into service in April 2016 and will offer connections for residue gas to the TransCanada Pipeline and other delivery points. The 23-mile crude oil gathering system follows the same route as most of the gas gathering pipeline and will connect to Pembina Pipeline Corporation’s Karr Lateral pipeline, which will serve Pembina’s terminal in northwest Alberta.

Steelhead LNG Corp. announced a pre-construction agreement with pipeline developer Williams to commence with the design and regulatory approvals for the Island Gas Connector Project, a proposed natural gas pipeline which will transport natural gas to Vancouver Island, where Steelhead LNG is exploring the development of two LNG facilities.

With the Malahat Nation, Steelhead LNG is pursuing the development of the proposed Malahat LNG Project, a floating natural gas liquefaction and export facility located on the shoreline of Malahat Nation-owned land approximately five miles south of Mill Bay, BC, on the east coast of Vancouver Island. On the west coast of Vancouver Island, Steelhead LNG is exploring the development of a proposed LNG facility with the Huu-ay-aht First Nations at Sarita Bay, BC, 46.5 miles southwest of Port Alberni.

The proposed pipeline for the project would transport natural gas 33 miles from Williams’ Northwest Pipeline’s interconnect with Spectra Energy’s BC Pipeline system at Sumas, WA, to Cherry Point, WA. From there, it would run subsea some 47 miles, landing directly at the proposed Malahat LNG project. While, the first phase of the project would be constructed to supply the Malahat LNG facility, the project would be designed to meet the potential capacity requirements of both proposed LNG facilities, thus offering potential shared infrastructure benefits. Delivering supply to the proposed LNG Project at Sarita Bay would require an additional independent pipeline from the east coast of Vancouver Island to Sarita Bay, designed, owned and operated by a separate Canadian entity and subject to its own regulatory approval process.

Williams will design, construct and operate the project. As an international pipeline, the project will be subject to the approval of the Federal Energy Regulatory Commission in the U.S. and the National Energy Board in Canada.

The proposed project will undergo rigorous regulatory, environmental and technical assessments. As part of the proposed project, Steelhead LNG and Williams will also undertake an extensive consultation and engagement process with potentially affected Canadian Aboriginal groups, United States Tribes, landowners, local stakeholders and communities.

Mexico

Mexico accounts for a number of pipeline projects coming on line in 2016, namely the Northwest Pipeline 22 System, the
Chihuahua Pipeline System and the Los Ramones Pipeline System, which have a total capacity of 4.8 Bcf/d. All these systems either are already online or will be online by early 2016.

Also, the following five recently authorized projects have completion dates well into 2017: Waha to San Elizario pipeline (1.35 Bcf/d), which connects to the San Isidro-Samalayuca system; Waha to Presidilo pipeline (1.35 Bcf/d; 2017), which connects to the Ojinaga to El Encino pipeline; El Encino pipeline (1.135 Bcf/d; July 2017); El Encino to La Laguna pipeline (1.35 Bcf/d); and Ramal Tula (0.485 Bcf/d).
These five systems, which will cost approximately $2.2 billion, will be completed in phases. In addition, Mexico will use the resulting imports to initially displace LNG imports at Altamira and eventually at Manzanillo.

As to area construction, TransCanada has been chosen to build, own and operate the Tuxpan-Tula Pipeline in Mexico. Construction
of the pipeline is supported by a 25-year natural gas transportation service contract with the Comisión Federal de Electricidad (CFE),
Mexico’s state owned power company.

TransCanada expects to invest approximately $500 million in the 36-inch diameter pipeline and anticipates an in-service date in the fourth quarter of 2017. The pipeline will be approximately 155 miles long and have contracted capacity of 886 MMcf/d. Construction is expected to start this year.

Also, Howard Midstream Energy Partners LLC plans to move forward with construction of the Nueva Era Pipeline, a 50-50 joint venture between HEP and Mexico-based energy and services firm Grupo Clisa. As proposed, the pipeline will connect HEP’s existing Webb County Hub in South Texas directly to Escobedo, Nuevo León, Mexico, and to the Mexican National Pipeline System (Sistema de Transporte Nacional Integrado) in Monterrey, Mexico. Mexico’s Comisión Federal de Electricidad (CFE) will be the foundation shipper on the approximately 200-mile, 30-inch Nueva Era Pipeline and will transport 504 MMCf/d of natural gas for a 25-year term to help fuel combined-cycle power plants in Escobedo, near Monterrey.

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