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Page added on April 11, 2018

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What Will It Take to Keep Up With Shale Gas Boom? $170 Billion

Production

Bottlenecks on the U.S. natural gas super highway are starting to stack up, raising concerns about whether infrastructure can be built fast enough to meet surging supplies.

Gas output will expand by 24 billion cubic feet, or 32 percent, through 2025 from last year, according to U.S. Energy Information Administration estimates. To support that growth, the country’s gas industry needs to spend $170 billion over the next seven years on pipelines, compressor stations, export terminals and other related infrastructure, said Meg Gentle, chief executive officer of gas exporter Tellurian Inc.

“One threat to the U.S. being able to export LNG and expand its export capability is the overall commitment to invest in infrastructure to move natural gas,” Gentle said in an interview at the Bloomberg New Energy Finance Future of Energy Summit in New York Tuesday.

It’s a warning that for parts of the country the pipeline woes aren’t over yet. Appalachian producers have been grappling for the better part of the shale boom of the past decade with limited pipeline access. Spot prices there slumped to record lows last year and have started to rebound as new capacity starts up.

Permian Problem

Now the Permian Basin, know for its oil-rich layers of rock, is facing the threat of having to slow down the output of crude because drillers lack capacity to handle all the the gas that’s flowing as a mere byproduct.

For companies building multibillion-dollar plants to chill gas into liquid and ship it abroad, the abundance of cheap gas from the Permian in West Texas is an advantage. Developments there “will happen” because it’s an environment supportive to energy infrastructure, she said. That may not happen fast enough for Appalachia.

Producers are getting increasingly concerned about worsening pipeline constraints, Drillinginfo co-founder Allen Gilmer said during a panel at the BNEF summit. Its harder for the industry to get its hands around this because these limits aren’t being driven by operating or engineering issues but more by “social change and cultural conditions,” he said.

RIGZONE



7 Comments on "What Will It Take to Keep Up With Shale Gas Boom? $170 Billion"

  1. Duncan Idaho on Wed, 11th Apr 2018 6:13 pm 

    “Producers are getting increasingly concerned about worsening pipeline constraints”

    They should– the supply needs to be long enough to cover the cost.
    Obviously, there is a concern.

  2. rockman on Wed, 11th Apr 2018 6:37 pm 

    Duncan – Don’t be impressed by that $170 billion. Given there are about 3 million miles of mainline and other pipelines that link natural gas production areas and storage facilities with consumers. That $170 billion would just be a tiny fraction of the value of the existing infrastructure.

    As far as “hoping” supplies last long won’t be a problem. Pipeline builders don’t “hope”. Typically the require “subscribers” that guarantee shipping a set volume of gas down the pipeline with a fixed pricing schedule. That’s because it typically takes 5+ years to just recover the initial investments.

  3. Duncan Idaho on Wed, 11th Apr 2018 6:44 pm 

    “That’s because it typically takes 5+ years to just recover the initial investments.”

    Thanks Rock– so the cost is not the issue?

  4. Anonymous on Wed, 11th Apr 2018 7:05 pm 

    Shale gas kicks ass, baby.

    https://www.eia.gov/naturalgas/weekly/img/201802_monthly_dry_shale.png

    That’s 50 BCF/day. That is a colossal amount of gas. Much more than the entire production of Qatar.

    And more than 80% of that growth has come in the last 10 years. It’s been so stunning that it has shut down a lot of conventional drilling, including the Rockman’s GOM drilling. (Can’t compete!) It’s been so strong that it has damaged the coal and nuclear industries.

    Oh…and there’s a lot of that gas. The PGC (full of geologists, not Wall Street analysts, not biz journalists) estimates over 3,000 TCF:

    The PGC’s year-end 2016 assessment of 2,817 Tcf includes 2,658 Tcf of gas potentially recoverable from “Traditional” reservoirs (conventional, tight sands, carbonates, and shales) and 159 Tcf in coalbed gas reservoirs…The U.S. Energy Information Administration (EIA) of the U.S. Department of Energy (DOE) estimates the proved gas reserves, which are additional to the resources assessed by PGC. When the PGC’s assessments of technically recoverable resources are combined with EIA’s latest determination of proved reserves (324 Tcf of natural gas as of year-end 2015), the U.S. future supply of natural gas stands at a record 3,141 Tcf, an increase of 288 Tcf (10%) over the previous evaluation.”

    [Since the US used 27 TCF last year, that is literally a 100+ year supply.]

    Oh…and sure that is TRR, not proved. But so what. Why the F would anyone go spend money and prove natgas that they aren’t going to use near term? Plus every two years, the PGC comes out with more gas resource. And the price has been going down trendwise since 2010 and futures projects it to continue to decline (inflation adjusted).

    We are getting BETTER at producing shale gas FASTER than we deplete it. Rock is not going to be in the GOM drilling gas wells for a loooooooong time.

  5. Boat on Wed, 11th Apr 2018 7:22 pm 

    Idaho

    I think your right. Wind and solar are projected to keep dropping in price increasing the chances of frozen Nat gas assets that normally are scheduled to run for decades. Because batteries are becoming cheaper and more advanced the run time for those nat gas peaker plants will drop maybe stranding assets in areas. It’s a new world. This is just the beginning of it. Conversely it may be the EV that saves Nat gas as renewable demand is overwhelmed.

  6. rockman on Thu, 12th Apr 2018 10:12 am 

    Duncan – No, cost is not the primary issue. Getting a pipeline project fully “subscribed” is the big hurdle. Once enough guaranteed throughput is subscribed construction begins regardless of the cost. Similar to how multi $billion LNG facilities get built.

  7. Dredd on Thu, 12th Apr 2018 10:28 am 

    What Will It Take to Keep Up With Shale Gas Boom?

    It will take remaining lost (You Are Here – 7).

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