| April 12
April 12 U.S. energy firms are scrambling to
finish a slew of pipelines that will unleash rich reserves of
shale gas in Pennsylvania, West Virginia and Ohio as the nation
prepares to become one of the world’s top natural gas exporters.
The pipelines are expected to boost output from shale fields
in the three states by giving producers access to new domestic
and international markets.
Those states could supply about a third of all U.S. natural
gas once the pipeline expansion is complete, up from about 25
percent now, according to projections from the U.S. Energy
Information Administration (EIA).
The network will bring cheaper fuel supplies for power
generation and industry being built in the eastern half of
Canada and the United States, especially along the U.S. Gulf
Coast. It would also transport the huge volumes needed to feed
facilities that chill the gas to liquid so it can be shipped
The construction addresses a lack of pipeline capacity that
has stunted development of two of the largest shale fields in
the United States, the Marcellus and Utica formations.
The lines should allow output to increase from both fields
by about 50 percent in the next two years, according to the EIA.
Gas from the Marcellus and Utica is among the cheapest in the
Among the largest projects under construction are Energy
Transfer Partners LP's (ETP) Rover; TransCanada Corp's
Leach XPress; and Williams Cos Inc's Atlantic
Sunrise. Those lines will move gas out of these shale basins to
markets in Canada, the U.S. Midwest and Southeast, including
expected connections to Gulf Coast export terminals.
The completion of the lines will be a welcome boon for the
firms and their investors after a tough couple of years. A slump
in international energy prices led to reduced demand for new oil
and gas pipeline capacity from producers.
ETP and other firms were also hit by a growing protest
movement of environmentalists, Native American rights groups and
U.S. military veterans, which delayed big ticket projects such
as the Dakota Access Pipeline.
Contractors building ETP's $4.2 billion Rover gas pipeline
from Pennsylvania to Ontario will hire up to 15,000 workers
during construction of the line, expected to be completed by
late 2017, according to ETP spokesperson.
Just over a decade ago - before technological innovation
unleashed huge oil and gas supplies trapped in shale rock - U.S.
gas production from conventional fields was in decline and the
nation was expected to become one of the world’s biggest
importers of natural gas.
High prices for fuel encouraged petrochemical and chemical
industries to move abroad.
Now, amid the shale revolution, the nation is producing 50
percent more gas, making it the world's biggest producer as
energy firms opened up new energy frontiers across the United
Prices for gas have averaged less than $3 per million
British thermal units over the past two years, a third of the
price in 2005, and are expected to remain mostly below that
level through at least 2023, based on current futures trading on
the New York Mercantile Exchange.
That cheap and ample supply motivated industrial firms to
spend billions to build and expand manufacturing facilities
mostly along the U.S. Gulf Coast but also in the Midwest, such
as chemical companies that use gas to make plastics.
Royal Dutch Shell PLC last year agreed to build a
multibillion-dollar petrochemical complex near Pittsburgh to be
close to the source of the Marcellus and Utica gas. It will
employ about 6,000 workers to build the facility and is expected
to create about 600 permanent jobs when completed.
Abundant supply has also sparked interest from many
countries in buying U.S. LNG exports.
The United States is expected to become a net exporter of
gas this year or next for the first time since 1957 on the back
of those rising LNG exports as well as pipeline flows to Mexico.
UNLOCKING PENNSYLVANIA RESERVES
At the center of activity in both the Marcellus and Utica is
Pennsylvania, which accounts for about 20 percent of U.S. gas
production, making it bigger than any state other than Texas.
Pennsylvania's output rocketed from 0.5 billion cubic feet
per day (bcfd) in 2006 to 14.5 bcfd in 2016, according to the
EIA and the Pennsylvania Department of Environmental Protection.
One billion cubic feet is enough to fuel about 5 million
homes - or every house in Pennsylvania.
Still, the state has the potential to pump a lot more gas as
more pipelines provide producers with avenues to new markets.
At least five pipelines capable of transporting over seven
bcfd from the Marcellus and Utica are scheduled to open in 2017,
with five more due for completion in 2018, capable of moving
another five bcfd.
Pipeline capacity from Pennsylvania, Ohio and West Virginia
was around 23 bcfd in 2016, according to the EIA and Thomson
Reuters data. If all pipes under construction are completed,
that would rise to more than 35 bcfd.
The pipeline construction and gas production expansion mean
billions of dollars in new investments in Pennsylvania and
hiring that will extend well beyond the energy sector, said Ryan
Unger, CEO of the Team Pennsylvania Foundation, a nonprofit
foundation focused on public-private partnerships.
“We are in a position now where we can maximize the state’s
resources to create good, stable jobs in Pennsylvania,” Unger
Some of the biggest drillers in Pennsylvania stand to
benefit most from increasing pipeline capacity. They include
units of Chesapeake Energy Corp, Cabot Oil & Gas Corp
, Range Resources Corp and EQT Corp.
Cabot sees an opportunity in the "underserved" markets of
the northeast, said spokesman George Stark.
"We’d love to see a pipeline build-out to get Pennsylvania
gas to New England,” he said.
Those four companies together expect to spend an estimated
$4.8 billion on U.S. drilling and well completions in 2017, up
about 61 percent from what they spent in 2016, according to a
capital expenditure analysis by Cowen & Co.
SHIFT TO EXPORTS
The U.S. started to export LNG from the lower 48 states in
2016; five additional export terminals are expected to open by
2020 to export LNG to large markets in Asia, including China and
Those terminals could make the U.S. the world's third
largest exporter of natural gas by 2018, according to an EIA
Most of the pipeline infrastructure in the Marcellus and
Utica was built before the shale revolution, when the region
produced just 3 percent of the nation's gas.
Those lines were designed largely to bring gas into the
region - not out of it - as customers in Pennsylvania and other
nearby states used gas from Texas and the Gulf Coast.
The new lines aim instead to take gas from Pennsylvania to
Almost a third of the wells drilled in Pennsylvania since
2004 were inactive because of a lack of pipelines to transport
the gas, according to a report prepared last year by a task
force created by Pennsylvania Governor Tom Wolf.
"Drilling for gas in Pennsylvania has far outpaced the
development of the infrastructure needed to get that gas to
markets," the task force said in the report. "The primary
challenge the industry faces now is to get the gas around or out
(Reporting by Scott DiSavino; Editing by David Gaffen, Simon
Webb and Brian Thevenot)