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Page added on February 1, 2014
Billions needed to meet natural gas demand
The $10 billion worth of natural gas processing infrastructure already built in the Marcellus and Utica shale region is only a fraction of what Blue Racer Midstream CEO Jack Lafield believes is needed in the coming years.
Lafield estimates $30 billion must be spent in midstream infrastructure to keep up with demand.
If he is correct, Blue Racer doubling the processing capacity at its West Virginia Natrium plant is just one expansion that companies will need to make in the next decade to keep natural gas flowing from nearby shale plays.
Lafield, who was speaking this week at the Marcellus-Utica Midstream Conference and Exhibition in Pittsburgh, believes extracting the gas from the Marcellus and Utica regions will be worth the investment, largely because of cheaper transportation costs involved with getting it to major metropolitan centers along the Eastern seaboard.
Earlier this week, Lafield said Blue Racer would double the daily processing capacity of its Natrium plant by spring. The facility, which recently reopened following a Sept. 21 fire, also will be equipped to ship natural gas liquids on the Ohio River by barge.
“We are right down the heart of the rich gas fairway,” Lafield said. “In my 42 years in the industry … this is about as good as it gets.”
10 Comments on "Billions needed to meet natural gas demand"
rollin on Sat, 1st Feb 2014 5:33 pm
Once they are on the catch-22 hamster wheel, they have to keep pushing both drilling and infrastructure. Otherwise, the profits will nose dive in a few years as production descends and debts won’t be paid off.
Shipping LNG is a big investment, first in the equipment needed to liquefy the gas and in the very specialized transport.
westexas on Sat, 1st Feb 2014 6:14 pm
As best that I can tell, the Marcellus produced about 8 BCF/day in 2013.
Citi Research estimates that the 2013 decline rate from overall existing US natural gas production was about 24%/year (all sources, dry gas wells, wet gas, associated gas). This would be the estimated percentage decline from 2012 to 2013, if no new wells were completed in 2013.
Using the (processed) dry gas metric, the EIA shows that the US produced about 66 BCF/day in 2013. Based on the Citi Research estimate, we need about 16 BCF/day of new production every year, in order to maintain a processed dry natural gas production rate of 66 BCF/day.
Or, in order to maintain 66 BCF/day, we would need to put on line the productive equivalent of the 2013 production from the Marcellus every 6 months. So, over a 10 year time period, we would to put on line twenty (20) times the productive equivalent of the 2013 production from the Marcellus–just to maintain 66 BCF/day for 10 years.
robertinget on Sat, 1st Feb 2014 6:55 pm
Rollin on:It’s not just a question of
‘pushing’ fracturing and drilling.
This would indicate little or no technical progress in both areas.
EOG for instance has already altered its
fractures from long thin cracks to shorter, wider shatters or ruptures.
Improvements in oil yield per well are demonstrable.
PV solar panels are not dropping in price ten percent a year because of demand or lack thereof. Manufacturing
processes are improving exponentially.
Automation replaces labor once thought essential.
Research follows money. Today’s PV panels generate double what
the same size might have done only a decade past.
The same is no doubt true with O&G drilling process. The only time we will hear about improvements may come around
earning reports.
BTW, I entirely support anti fracking movements. Radicals always
force governments to pay closer attention, pass and ENFORCE regulations.
Why do ya think bankers hate regulation?
What bugs be is the disrespect both sides have for public intelligence. Typified by bumper strip word bites and dumb slogans.
Which looks better? (car’s don’t have bumpers)
#1 “Stop Dangerous Fracking!”
#2 “Take Supercomputers Away From Big Oil or Big Pharma or Monsanto or anyone Messing About With Human Cloning Body Parts!
Ban Abortion and Birth Control
While we are at it. KEEP BIG Government Off Our Backs…. Promote Voter Suppression.
rockman on Sat, 1st Feb 2014 7:08 pm
And to add to wt’s enlightening post the NG transportation system is not designed to meet the max demand and not even the max production capability. The dynamic depends on cost vs. The cash flow generated. Expanding any pipeline system to meet max demand would require a larger capex investment which requires a guaranteed max flow rate at least during the payout of the investment. An p/o of a typical major pipeline is in the order of 5 to 8 years. So not only must there be a reasonable expectation of long term demand a similar expectation is required for the production side.
And that’s where a number of pipeline builders got slaughter in the east Texas shale gas boom. They bought the same hype the drilling companies did and violated the normally cautious profile of pipeliners have historically been the most financially conservative segment of the oil patch. Unlike the ‘get rich explorationist’ pipelines tended to look at their investment more like a long term annuity. A good well can generate significant income for 5 or 6 years. A pipeline…30 or 40 years.
The memory of those very bad post shale gas bust of ’09 are not forgotten. But that won’t hold back promoters luring investors.
rollin on Sat, 1st Feb 2014 8:34 pm
Robertin, that’s rollin’ on a river to you. Don’t really see the difference between pushing drilling a pushing drilling with some new tech methods. Still is drilling new holes and putting out more product. Maybe just a case of semantics.
West Texas says it like it is, the companies will have to drill like mad to keep the status quo and Rockman points out that pricing will be the motivation to do that (and build more pipelines). Soon PA will be filled with another 50,000 wells or more.
I have a photo right next to me of NG pipes going up to the Marcellus on rail cars. Haven’t seen that happen in over a year now in my area. For a while the pipe was being delivered every week or so. Guess those projects are finished and no need for more right now.
rockman on Sat, 1st Feb 2014 9:41 pm
Rollin – Some interesting stats: in 2006, before the frac’ng boom, there were 49,000 wells producing wells in PA. Today there are 56,000 wells today. So dispute the hype not that much new drilling. But a lot of non-frac’d wells have been drilled in PA over the years. And those seem to represent a greater danger to the environment than the frac’d wells. Apparently, unlike Texas and La., their regulators didn’t do a great job of tracking those earlier wells and, in particular, making sure they were plugged properly:
“The best guess of both the state and the energy industry is that somewhere in the neighborhood of 325,000 wells have been drilled in Pennsylvania. Of those, about 120,000 have state permits on file. There’s probably close to 200,000 wells that are largely or relatively unaccounted for in the commonwealth.”
And some of those “plugged and abandoned” wells weren’t properly plugged and occasionally blow oil, NG and/or salt water to the surface. Hopefully the PA regulators are doing better with the new wells.
James on Sun, 2nd Feb 2014 12:26 am
And all that money needed to be invested, if it ever is, will be passed onto customers causing the price of “cheap gas” to not be so cheap anymore.
rockman on Sun, 2nd Feb 2014 1:06 am
James – From your lips to Dog’s ear. LOL. Unfortunately for me and my cohorts it doesn’t work like that. If someone invests $2 billion to lay a pipeline and either there’s not enough NG supplied by the producers or not enough demand by the consumers they can’t raise their tariff fees to make up for the low revenues. They simply lose their ass. You seem to be under the same wrong impression others have: how much it costs me to produce a bbl of oil or ship an mcf of NG down a pipeline doesn’t determine what I get paid.
As I mentioned about the big buildup of pipelines during the east Texas shale gas boom: when the bust came and not enough gas was available to move thru those lines the owners couldn’t arbitrarily increase the price for transporting it. They could only charge what the market would bear. And that wasn’t much at the time and hundreds of $millions were lost.
We’re the oil patch and not the gov’t: we can’t force the citizens to give us the money we want. LOL.
rollin on Sun, 2nd Feb 2014 1:30 am
rockman, the Pa DEP reports 6667 active unconventional wells and 85,578 conventional gas wells. I’ve been seeing fracking materials going up to NE Pa by rail lately, so the drilling is still happening.
Makati1 on Sun, 2nd Feb 2014 4:04 am
The Hydrocarbon age will end because of lack of money, not lack of hydrocarbons.