COVID-19 One More Headache to U.S. Natural Gas Midstream Projects Facing Long List of Hurdles

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Researched by Industrial Info Resources (Sugar Land, Texas)-- High summer temperatures and low natural gas prices have heightened the need for midstream capacity across the U.S., and the COVID-19 pandemic is yet another challenge facing the bedeviled gas transportation market. Industrial Info is tracking more than $1.1 billion worth of natural gas midstream projects across the U.S. that have been delayed or otherwise affected by COVID-19 precautions, including multi-phase projects in busy areas such as the Marcellus and Utica shale plays and the Permian Basin.

Click on the image at right for a map of natural gas midstream projects across the U.S. that have been delayed or otherwise affected by COVID-19.

EQM Midstream Partners LP's (NYSE:EQM) (Canonsburg, Pennsylvania) MVP Southgate project, pipeline system that is designed to carry about 375 million standard cubic feet per day of natural gas about 75 miles from the Mountain Valley Pipeline terminus in Pittsylvania County, Virginia, to new delivery points in North Carolina's Rockingham and Alamance counties. Several major portions of the project were set to begin construction in January, but have since had their kickoff dates pushed back to the fourth quarter:

• the $110 million Virginia section, which runs 31 miles from Chatham, Virginia, to the state border near Rockingham, North Carolina; see project report
• the $45 million Lambert compressor station, north of Chatham; see project report
• the $105 million Chatham compressor station, west of Chatham; see project report
• the $155 million North Carolina section, which runs 42 miles from Rockingham to Graham, North Carolina; see project report

The MVP Southgate project ran into an additional hurdle earlier this month when North Carolina's environmental regulators turned down the company's request for a water quality permit, according to the Charlotte Business Journal. North Carolina's Department of Environmental Quality noted that MVP's 300-mile Mountain Valley Pipeline mainline has seen several federal permits suspended and is embroiled in ongoing legal challenges. NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida) is serving as project manager.

In the bustling Permian Basin, Summit Midstream Partners (NYSE:SMLP) (The Woodlands, Texas) has been struggling with mounting challenges to its Double E Pipeline Project, which is designed to carry 1.4 billion cubic feet per day of natural gas from the Delaware Basin to Waha, Texas, connecting the busiest area of the Permian Basin to a Waha's liquid trading point, which has multiple existing and planned takeaway pipelines serving demand centers along the U.S. Gulf Coast and in Mexico.

The Double E project took a major step forward in April when it was issued a favorable environmental assessment from the U.S. Federal Energy Regulatory Commission (FERC), but it is still awaiting final permit approvals. Three major phases of the line were set to begin construction in the spring of this year, but now are unlikely to begin construction until early next year due to COVID-19 and the permitting issues:

• an estimated $125 million section from Carlsbad to Eddy County, New Mexico, running about 33 miles; see project report
• an estimated $310 million section from Eddy County, New Mexico, to the state border near Loving, New Mexico, running about 82 miles; see project report
• an estimated $15 million section connecting the line to the hub in Waha, Texas, running about 1.4 miles; see project report

Also facing delays are a 17-mile, estimated $45 million pipeline lateral in Loving, New Mexico, and an estimated $90 million compressor station near Carlsbad. For more information, see Industrial Info's project reports on the lateral and compressor station.

"The Double E project team continues to work diligently to find ways to reduce costs, while maintaining a 'safety first' work environment and in-service date target of the third quarter of 2021," said Marc Stratton, the chief financial officer of Summit Midstream, in a quarterly earnings-related conference call earlier this month. "Approximately 80% of Double E's development costs have been locked in via service contracts and purchase orders at favorable discounts relative to the original budget."

Stratton said overall costs for the project have dropped from $500 million in June to about $450 million. He also noted that the company is working to secure third-party financing alongside the receipt of the FERC 7 (c) certificate, which the company expects before the end of the third quarter.

Storage projects associated with gas pipelines also have been affected by COVID-19 precautions. NGL Energy Partners LP (NYSE:NGL) (Tulsa, Oklahoma) plans to build the estimated $120 million Magnum Natural Gas Salt Dome Storage Caverns in Delta, Utah, which would feature four underground solution-mined storage caverns capable of holding up to 13.5 billion cubic feet of natural gas. The caverns would be interconnected with an interstate natural gas pipeline system by a new 61-mile-long header pipeline, according to the company. Following nearly a decade of delays, the project received its final approval earlier this year and was set to begin construction this summer, but it now has been pushed back to January 2021.

NGL also received final approval in April for an estimated $30 million in compressor additions at the Magnum caverns, which will include four gas-fired generators with a total output of 8 MW. Like the main facility, it was set to begin construction this summer but was pushed back to January. For more information, see Industrial Info's project reports on the storage caverns and compressor stations.

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.