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The Great American Oil And Natural Gas Pipeline Boom

Energy Secretary Rick Perry, left, speaks as President Donald Trump smiles during an event about the environment in the East Room of the White House, Monday, July 8, 2019, in Washington. (AP Photo/Alex Brandon)

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Despite some clickbait headlines trying to convince you otherwise, the U.S. oil and natural gas pipeline build-out continues apace

This makes sense: since 2008, U.S. crude oil and gas production have respectively boomed 150% to 12.3 million b/d and 60% to 90 Bcf/d.

Pipelines get approved in the first place because rising usage demands it.

Originating in Texas, we track nearly 40 pipelines covering 11,000 miles either being built or in pre-construction development.

Just a few days ago the DC Circuit Court of Appeals upheld FERC orders approving the 197-mile, 1.7 Bcf/d Atlantic Sunrise Project (connecting PA gas to mid-Atlantic markets), denying numerous objections from anti-gas environmental groups.

The court backed FERC’s position of market need for the pipeline, specifically citing evidence that there were contracts for 100% of the capacity. 

Indeed, very quietly, the International Energy Agency reports that the U.S. led the world in 2018 for new oil demand (+540,000 b/d) and new gas demand (+7.8 Bcf/d). (read that again).

For comparison, the annual increase in U.S. gas demand in 2018 was equivalent to the UK’s current consumption.

As the main sector of use, U.S. gas demand for electricity has soared 60% since 2008 to 30 Bcf/d.

Just as importantly, we are building an immense oil and gas export complex to bring reliable and affordable fuels to an energy-deprived world.

Now the largest oil and gas producer, we will probably become the largest exporter of both within five years.

In the rich Western economies, for instance, oil and gas supply over 60% of all energy.

Gas is especially the go-to fuel to lower emissions while backing up wind and solar power.

The EIA is currently tracking over 160 new U.S. gas pipeline projects, with a staggering 113 Bcf/d of capacity.

In Appalachia (OH, WV, PA), for instance, where nearly 40% of U.S. natural gas is produced, there is a whopping $32 billion in new pipelines in the works.

This will add 23 Bcf/d of new takeaway capacity to a region that already produces 33 Bcf/d.

Northeast region slated for record natural gas pipeline capacity buildout in 2018;” “Another New Gas Pipeline Is Coming to the Permian Basin.”

These build-outs are essential.

The U.S. Department of Energy reports that the majority of new power plants in this country will be natural gas, a hefty 235,000 MW of additional gas capacity in the coming decades.

It could actually be even higher given how low gas prices are.

Lowering the ability of other power sources to compete, some expect U.S. gas prices to not clear the $3 range until 2026 at the earliest

Gas pipelines are good for the environment too: BNEF reports that more natural gas “has done more to curb U.S. carbon emissions in the past decade than any other single factor, including new renewable build.”

New approved natural gas pipelines continue to mount.

Data source: EIA; JTC

Down in Texas, the Permian pipeline boom continues apace.

And for good reason: the Permian basin now produces 33% of U.S. crude oil and 16% of natural gas.

With the largest U.S. oil and gas discovery ever in December, doubling our reserves, the Permian’s future remains very bright.

In particular, crude pipelines have low barriers to entry.

The Permian is expected to quickly go from a bottleneck region to potentially having more pipe than crude production can fill.

One key goal for Permian producers is to soar the play’s 400,000 b/d capacity to Corpus Christi, Texas for export.

By the end of the year, there should be some 1.7 million b/d of capacity to Corpus Christi.

Surpassing the Port of Houston, the Port of Corpus Christi will likely become the largest crude export terminal in the U.S. over the next seven to 10 years.

Midstream companies are now building 4.6 million b/d of crude capacity out of the Permian to the Gulf Coast, set to enter service from end-2019 to the first-half 2021.

Places like New York and New England have shown that pipeline blocking means energy prices that are 50% or higher above the national average, hurting American families and businesses.

Other key issues supporting pipelines include President Trump’s Executive Order to stop individual states and governors from blocking projects that could greatly benefit other states.

And the hot topic of enhanced cybersecurity is critical for the oil and gas industry.

Reducing leaks and accidents is a top priority because it stops lost product and maintains a corporation’s invaluable reputation.

In fact, the oil and gas industry has been pushing for more communication with federal regulators.

For example, the Interstate Natural Gas Association of America just appointed ex-TSA offifical Michael Isper to the newly created role of director of security, reliability and resilience.

The key takeaway of the ongoing U.S. pipeline success story is simple: bet on oil and natural gas.

The U.S. Department of Energy projects that oil and natural gas will still supply over 65% of our energy in 2050.

Please be sure to follow Jude on Twitter

 




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