Released April 05, 2021 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Natural gas production at the Haynesville Shale could nearly double by the middle of this decade, but fulfilling that potential will require construction of more outbound gas pipeline capacity, a gas analyst at ENVERUS (Austin, Texas) told a recent virtual conference. And the production potential of the Haynesville could be thwarted by the Biden administration's push to decarbonize the U.S. economy.
Speaking at ENVERUS' recent Evolve virtual conference, Hakan Corapcioglu, a senior energy analyst at ENVERUS, said takeaway constraints will limit production of low-cost associated gas, which is produced when companies drill primarily for oil. He identified the Appalachian region, which includes the Marcellus and Utica shale formations, as facing particular outbound capacity constraints, though gas producers in Western Canada also faces that challenge.
Depending on West Texas Intermediate (WTI) crude oil prices, Corapcioglu said some associated gas is expected to come from the Permian, Denver-Julesburg and Eagle Ford unconventional formations. The Haynesville shale, and the Appalachian region, are the gas-focused areas that will "bring the significant amounts of production to help meet expected demand growth" -- assuming adequate outbound pipeline capacity for each region can be constructed.
Click on the image at right to see ENVERUS' projection of natural gas production growth from various basins across North America through 2025.
"The difficulty building pipeline capacity out of Appalachia supports prices elsewhere," he commented. Production in that region, currently about 33 billion cubic feet per day (Bcf/d), is projected to rise to about 38 Bcf/d by January 2023, he told the virtual conference. At current production, there is sufficient outbound transportation capacity, but accommodating future production growth will require the Mountain Valley Pipeline to begin operating. That proposed pipeline has been delayed for years by litigation and permitting issues. If that project doesn't begin operating by January 2023, producers in the area may have to curtail production of some gas.
Among the other plays, he continued, the Haynesville has the deepest inventory of new wells. But if gas prices go higher, other regions, including the Rockies, Eagle Ford and Midcontinent also could ramp up gas production.
Production from the Haynesville shale, straddling eastern Texas and northwestern Louisiana, hit a record of 10 Bcf/d last year, Corapcioglu commented. He said operators there benefitted from earlier experiments with different completion techniques, including increasing the amount of proppant, number of stages and amount of fluids.
For more on the Haynesville, see January 22, 2020, article - Cowboys Owner Jerry Jones Doubles Down on Haynesville Shale, Drawn by Production Records, LNG Exports.
Corapcioglu forecast that Haynesville production could rise by as much as 9 Bcf/d by 2025, nearly doubling current production, under the right conditions. The right price, as always, is one of those conditions. Another is whether new outbound pipeline capacity can be constructed to bring gas from the formation to where it will be used. Current and planned Gulf Coast liquefied natural gas (LNG) export terminals, power plants and other industrial concerns, including chemical processing companies, are widely seen as driving future U.S. gas demand, assuming the COVID-19 pandemic is defeated.
Click on the image at right to see a projection of future natural gas production from the Haynesville Shale.
There are a number of gas pipelines that have been proposed to provide more outbound transport capacity to the Haynesville, but their fate is uncertain given the Biden administration's commitment to decarbonizing the power sector and the broader U.S. economy. For more on that, see January 22, 2021, article -- Big Oil, Big Business Slam Biden's Pause on New Oil & Gas Leases on Federal Lands and Waters. As president, Donald Trump was a strong proponent of building new energy infrastructure. In his first day in office, President Joe Biden cancelled the partially built Keystone XL Pipeline and underscored his commitment to decarbonizing the economy to fight global climate change.
Though Corapcioglu did not speak at length about these proposed pipelines, the active pipeline projects in the region include:
Dirks made these further points:
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Speaking at ENVERUS' recent Evolve virtual conference, Hakan Corapcioglu, a senior energy analyst at ENVERUS, said takeaway constraints will limit production of low-cost associated gas, which is produced when companies drill primarily for oil. He identified the Appalachian region, which includes the Marcellus and Utica shale formations, as facing particular outbound capacity constraints, though gas producers in Western Canada also faces that challenge.
Depending on West Texas Intermediate (WTI) crude oil prices, Corapcioglu said some associated gas is expected to come from the Permian, Denver-Julesburg and Eagle Ford unconventional formations. The Haynesville shale, and the Appalachian region, are the gas-focused areas that will "bring the significant amounts of production to help meet expected demand growth" -- assuming adequate outbound pipeline capacity for each region can be constructed.
"The difficulty building pipeline capacity out of Appalachia supports prices elsewhere," he commented. Production in that region, currently about 33 billion cubic feet per day (Bcf/d), is projected to rise to about 38 Bcf/d by January 2023, he told the virtual conference. At current production, there is sufficient outbound transportation capacity, but accommodating future production growth will require the Mountain Valley Pipeline to begin operating. That proposed pipeline has been delayed for years by litigation and permitting issues. If that project doesn't begin operating by January 2023, producers in the area may have to curtail production of some gas.
Among the other plays, he continued, the Haynesville has the deepest inventory of new wells. But if gas prices go higher, other regions, including the Rockies, Eagle Ford and Midcontinent also could ramp up gas production.
Production from the Haynesville shale, straddling eastern Texas and northwestern Louisiana, hit a record of 10 Bcf/d last year, Corapcioglu commented. He said operators there benefitted from earlier experiments with different completion techniques, including increasing the amount of proppant, number of stages and amount of fluids.
For more on the Haynesville, see January 22, 2020, article - Cowboys Owner Jerry Jones Doubles Down on Haynesville Shale, Drawn by Production Records, LNG Exports.
Corapcioglu forecast that Haynesville production could rise by as much as 9 Bcf/d by 2025, nearly doubling current production, under the right conditions. The right price, as always, is one of those conditions. Another is whether new outbound pipeline capacity can be constructed to bring gas from the formation to where it will be used. Current and planned Gulf Coast liquefied natural gas (LNG) export terminals, power plants and other industrial concerns, including chemical processing companies, are widely seen as driving future U.S. gas demand, assuming the COVID-19 pandemic is defeated.
There are a number of gas pipelines that have been proposed to provide more outbound transport capacity to the Haynesville, but their fate is uncertain given the Biden administration's commitment to decarbonizing the power sector and the broader U.S. economy. For more on that, see January 22, 2021, article -- Big Oil, Big Business Slam Biden's Pause on New Oil & Gas Leases on Federal Lands and Waters. As president, Donald Trump was a strong proponent of building new energy infrastructure. In his first day in office, President Joe Biden cancelled the partially built Keystone XL Pipeline and underscored his commitment to decarbonizing the economy to fight global climate change.
Though Corapcioglu did not speak at length about these proposed pipelines, the active pipeline projects in the region include:
- Haynesville Global, a $650-million, 200-mile proposed pipeline that could transport up to 2 Bcf/d to the proposed Driftwood LNG export terminal. The viability of this proposed pipeline, and a second one under development, Delhi Connector, likely is tied to the fate of that planned LNG terminal, ENVERUS said. The Delhi Connector would also have the ability to transport up to 2 Bcf/d. A final investment decision (FID) on the Driftwood terminal is expected later this year. Assuming either or both pipeline projects move forward, they are expected to be in service sometime after 2023. Both projects are being developed by a unit of Tellurian Incorporated (NASDAQ:TELL) (Houston, Texas).
- CJ Express, operated by Midcoast Energy LLC (Houston, Texas), added new compression recently to increase the amount of gas it could move out of the Haynesville.
- Gulf Run pipeline project, being developed by a unit of Enable Midstream Partners L.P. (NYSE:ENBL) (Oklahoma City, Oklahoma), is expected to transport up to 1.7 Bcf/d when it comes online in late 2022. The project, which has a $900 million total investment value (TIV), is expected to begin construction in the near future.
- Acadian Gillis Expansion, an 80-mile lateral, is scheduled to transport up to 1 Bcf/d. The project is expected to begin construction in the near future and be operating by the end of 2021. Developed by Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas), this proposed pipeline has a TIV of about $280 million.
Dirks made these further points:
- Louisiana does not have necessarily any issues with federal lands, unlike the New Mexico and Rockies. These projects should not see issues from any future federal lands rule slowing or stopping oil & gas development and pipeline construction.
- Aside from the cancellation of the Keystone XL pipeline, there are no breaking developments relating to the Biden administration's viewpoint on oil & gas development as well as pipeline construction. The administration is planning on delivering an interim report by summer, but there is still a lot of unclarity on the issue and what this all means from a more permanent approach.
- Pipeline projects in the Haynesville have not had the same permitting challenges as projects in the Appalachians.
- Although it is too early to speak definitively, the Democratic majority on the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) might adopt a more active environmental, social and governance (ESG) perspective, particularly on carbon dioxide (CO2) emissions, when it considers permits for oil & gas drilling and pipeline construction.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
