PITTSBURGH—There’s little doubt that the mix of operators, financial analysts and service providers at Hart Energy’s recent DUG East Conference & Exhibition were anxious to look past the obstacles of the present and embrace the opportunities that might await them in the very-near future.
That juxtaposition of anxiety and anticipation was probably felt equally by the gathered midstream executives also in attendance, as they currently look for ways to get the vast amounts of natural gas out of the Marcellus and Utica and into domestic and global markets.
That, of course, means pipelines, and according to Michael Huwar, vice president of marketing at Columbia Midstream Group, there are “some great opportunities” in the region for pipeline operators as early as 2017.
Huwar pointed to his own company as an example of the significant investment midstream companies have earmarked for the Marcellus and Utica. “We’ve identified over $6.3 billion of regulated growth out of the region and another $4 billion to $5 billion in modernization efforts to move gas for producers,” he said.
“We’ve heard several producers say, ‘production is great.’ Obviously, they’re doing everything they can to be efficient. We’re reminded every day by producers that they need takeaway capacity to help with the balance sheets and income statements,” he continued.
In the last five years, the Marcellus and Utica has become the leading U.S. natural gas growth play. Huwar pointed out that production in the region has climbed to more than 23 billion cubic feet per day (Bcf/d), representing a 300% growth rate from 2011 data. In the same period, the rest of the U.S. production has declined.
“This is the reason to build pipelines [in the Marcellus/Utica],” Huwar said. “That’s why the region is so important to us and the industry. It has the gas. It’s available. It’s ready for consumers in huge markets.”
He added that midstream investment in the region involved “producer-focused pipeline development,” which he said is the approach his company has planned.
“[Producers] want increased optionality. They’ve got to be able to take gas to multiple areas of the country,” he said.
Huwar also pointed to the rising costs of pipeline development as another consideration. “It’s become a huge drag,” he said bluntly. “Producers also struggle with volume commitments.”
So how does Columbia Midstream plan to address those producer concerns?
First, the company has looked toward repurposing existing facilities, which Huwar said the company “has done on many occasions.” It’s also added to its capacity via compression and looping.
As a last resort, the company has looked at greenfield construction. ‘It’s great to spend capital, to get projects approved. It’s great to grow your business, but at the end of the day, producers need a viable way to get gas out of the region in a cost-effective manner,” Huwar said. “When you think about those greenfield projects, there are much higher costs that producers will have to bear. There are also issues around timing, permitting, construction and vast outreach challenges.
“You’ve heard the term, ‘all politics are local.’ Well, in Pennsylvania and this region, so is zoning,” he continued. “Setbacks and exclusions are a daily battle.”
Still, Pennsylvania sits first in natural gas pipeline projects, with fellow Marcellus/Utica neighbors Ohio and West Virginia following close behind. Huwar pointed out that 65% of the total new mileage and 39% of total new pipeline capacity in the U.S. come from those three states.
“That’s significant takeaway for the region,” he said. “So help is on the way.”
Len Vermillion can be reached at lvermillion@hartenergy.com.
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