Race is on to Build Pipelines to Bring Gas from Marcellus and Utica Shales to Market

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Rising natural gas production from the Marcellus and Utica shales has led to a bevy of large pipeline projects competing to bring the gas to markets in the U.S. Mid-Atlantic region and beyond. At least four major gas pipeline projects are being developed:

• The Williams Companies Incorporated (NYSE:WMB) (Tulsa, Oklahoma) is developing the Appalachian Connector, formerly called the Western Marcellus Pipeline, which would transport up to 2 billion cubic feet of gas per day (Bcf/d) from Ohio and West Virginia to an existing Transco Pipeline in Chatham, Virginia.
• The Mountain Valley Pipeline, being developed by units of EQT Corporation (NYSE:EQT) (Pittsburgh, Pennsylvania) and NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida), would transport at least 2 Bcf/d over a 300-mile stretch from northwestern West Virginia to southern Virginia. The project pre-filed its application with the Federal Energy Regulatory Commission (FERC) last October. If a permit is granted, construction could start in late 2016, and the pipeline could be operating in late 2018.
• Spectra Energy Corporation (NYSE:SE) (Houston, Texas) is developing the Appalachia to Market (A2M) Pipeline project, which would transport up to 1 Bcf/d from various points along its Texas Eastern system in the Mid-Atlantic region. The project could be operating as early as November 2018.
• The Atlantic Coast Grassroot Natural Gas Pipeline is a project of up to $5 billion that would transport up to 1.5 Bcf/d of gas from the Marcellus to North Carolina. This project is being developed by units of Dominion Resources Incorporated (NYSE:D) (Richmond, Virginia), Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina), Piedmont Natural Gas Company Incorporated (NYSE:PNY) (Charlotte) and AGL Resources Incorporated (NYSE:GAS) (Atlanta, Georgia). The Atlantic Coast Pipeline could kick off construction in 2016 and be operational by late 2018, if it receives all of its regulatory permits in the expected timeline. For more on that project, see December 1, 2014, article - Proposed Pipeline Would Bring Gas from Marcellus, Utica Shales to North Carolina, Virginia.

Click on the images below for preliminary proposed maps of the Appalachian Connector, Mountain Valley, Appalachia to Market and Atlantic Coast pipelines, respectively.



Development of these and other pipelines in the region is being driven by the still-rising production of gas from the Marcellus and Utica shales. Marcellus gas production averaged about 16 Bcf/d in January, while Utica production that month was about 1.8 Bcf/d, according to the U.S. Energy Information Administration (EIA) (Washington, D.C.), the statistical and analytic branch of the U.S. Department of Energy (DoE) (Washington, D.C.). Moreover, production from those two shale formations is expected to continue rising, hitting about 34 Bcf/d in 2035, according to a recent estimate from consultants ICF International (NASDAQ:ICFI) (Fairfax, Virginia). For more on that estimate, see January 28, 2015, article - Oil & Gas Project Spending Plans Still Robust, but Changes Are Expected.

Click on the images at right to see current gas production in the Marcellus and Utica shales.

The Appalachian Connector, Mountain Valley, and Appalachia to Market projects all held open seasons in 2014, where shippers could reserve capacity on the projects. The Mountain Valley project last October announced it secured 2 Bcf/d day of firm capacity commitments at 20-year terms. As yet, neither the Appalachian Connector nor the Appalachia to Market projects have received the necessary firm commitments to move forward.

"We're still assessing the feasibility of our project," Chris Stockton, a spokesman for Williams, told Industrial Info. "We had good feedback during our open season, and we continue to talk to potential customers. If we don't have the market support, we won't build the Appalachia Connector. Timing-wise, there are still a lot of variables."

The company's open season ended last September. Stockton said there was no specific timetable for announcing the next milestone.

Creighton Welch, a spokesman for Spectra Energy, told Industrial Info it had received "robust response from shippers during our open season," which ended last August. "There is significant market interest, and we're still working with potential shippers," but the company also has no specific cost estimates or milestones it can share right now, he added. Welch emphasized the Appalachia to Market project is scalable and that it will be located primarily within Texas Eastern's current footprint, "minimizing impacts to landowners, communities and the environment."

"All of these pipelines are not directly competing to move gas to the exact same location, but they are competing to move gas from the Marcellus and Utica shales to points south and east of those formations," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries.

"It's a very dynamic market right now: Low gas prices and rapidly rising production is great news for gas-fired power plants, and industrial gas users like petrochemical plants and liquefied natural gas (LNG) export terminals. Billions of dollars of infrastructure are required to be able to move the gas from Point A, where it is produced, to Point B, where it will be consumed. In that sense, all of these projects are competitors. We know that not every gas-using industrial project that is proposed will get built. And, as projects move forward, are delayed or cancelled, the projected demand shifts. Winning in this market is like playing three-dimensional chess."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.