NE Excess Pipeline Additions
Pipeline Overbuild In Marcellus and Utica Gas Shale Region
Commentary by S. Tom Bond, Resident Farmer, Lewis County, WV
A very interesting article appeared recently in the Natural Gas Intel blog under the title “Marcellus on pace for overbuild, says Braziel.”
Rusty Braziel is the present of RBN Energy (described in references as a fundamentals analytics company known for its energy markets consultancy).
More takeaway capacity has become a common refrain in the industry, however the long list of projects means the Northeast could be headed for an overbuild. Braziel used the graph above, which is printed on larger scale at Friends of Wintergreen. He pointed out the fact that over expansion has happened to every other segment of the industry. Optimistic exuberance has been the rule in both gas and oil in The United States.
Braziel said the graph depends on the price of both gas and oil, which for it were pegged at $4 gas and $60 oil. Our FrackCheckWV readers are reminded that this is an “educated guess,” subject to conditions such as foreign production, no decline because of having to move out of “sweet spots,” a projection of incursion of renewables in the energy market, and government regulations. All very “iffy.” Texas gas, the heart of the oil and gas business, is feeling the hurt of wind power now.
Pipelines are less attractive investments than fracking because of the long time for return, where as fracking (if the gas can be sold) provides a very quick return. However, pipelines are paid by utility customers over decades, with lots of interest going to the banks that finance them. The public has an interest in minimizing the number and size of what is built.
Braziel also said what we are seeing is the tail end of a bubble, and what’s actually happened is that bubble has attracted billions of dollars worth of infrastructure investment that now has to be worked off. Rate differentials between the production field and the market are sometimes huge. He cites over $100 a thousand cubic feet on one occasion. However, only nine of the fifteen highly productive counties in Pennsylvania, West Virginia and Ohio, “have anything going on today.”
See also: Appalachian Mountain Advocates
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