It’s not easy being a greenfield project.
A BTU Analytics senior analyst assessed difficulties faced by efforts to build pipelines and debottleneck the Northeast during a Robert W. Baird webinar on Jan. 13.
“We at BTU tend to be more bearish in terms of the likelihood of these projects coming online in time,” said Marissa Anderson. “Rover is really looking like it’s not going to happen and meet its 2017 in-service date.”
Rover is an interstate pipeline that could take 3.25 billion cubic feet per day (Bcf/d) of domestic natural gas across the country and into Canada, according to its website.
BTU is watching six major projects that will provide 11 Bcf/d of incremental capacity if they come online as scheduled between June 2017 (Rover’s Phase 1) and November 2019. However, delays from federal and state agencies, and significant resistance from environmental activist organizations, have placed in-service dates in doubt.
So far, two major projects—The Williams Cos.’ (NYSE: WMB) Constitution Pipeline and Kinder Morgan Inc.’s (NYSE: KMI) Northeast Energy Direct—have landed in what BTU analysts term “pipeline purgatory.” Both were derailed by fierce opposition on the state and local levels.
Brownfield projects, however, which mostly involve expanded compressor station capacity or perhaps minor looping on existing pipelines, are expected to bring about 3.6 Bcf/d of incremental capacity online by the end of 2018. BTU sees these projects as on track to make their in-service dates, partly because they attract less attention.
“They require less new pipe to be put into the ground,” Anderson said. “We treat them as being less at-risk than some of these larger greenfield projects, where it’s miles and miles of pipe and can become a target for public activists.”
Major projects like PennEast Pipeline Co. LLC and Dominion Resources Inc.’s (NYSE: D) Atlantic Coast Pipeline have triggered such intense backlash--Anderson refers to PennEast as “Public Enemy No. 1” because it has garnered more than 5,000 comments to the Federal Energy Regulatory Commission--as to make them candidates for “purgatory.”
“If some of these start to get delayed, with BTU’s general outlook, then that can really tighten the market on the supply side where overall supply-demand is really tight for ’17 into ’18, meaning higher prices, wider differentials for the basins,” Anderson said. “Once all these projects come online, it’s a question of, Will they actually be full?”
Her outlook is that the Northeast will be demand-constrained on the natural gas side, so that even if all of the projects were to be completed, they would not be flowing at full capacity. What that means for the overall market depends on your perspective.
“We [BTU] are bearish for differentials in the Northeast,” Anderson said, “but we’re bullish overall because the U.S. is going to be supply-constrained.”
Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.
