September 10, 2018

Natural Gas Pipelines: Driving Jobs Along The Supply Chain

Last Friday, the Federal Energy Regulatory Commission (FERC), announced accelerated schedules for final permitting decisions on 12 pending projects. All of these projects are now slated for FERC certificate decisions in 2019 and early 2020.

This news comes after the Energy Equipment and Infrastructure Alliance (EEIA), which the Metals Service Center Institute is a member of, sent a letter to President Donald Trump on Aug. 30 urging expedited FERC environmental reviews of pending liquified natural gas (LNG) export projects and associated natural gas pipelines.

This announcement is important for two reasons:

  • LNG exports will drive major increases in U.S. natural gas production, delivering significant opportunities to the upstream supply chain; and
  • Each LNG project requires substantial investment in the added pipeline capacity.

If all 12 projects are approved, built and operated at capacity, by the late 2020s they would add another 22 billion cubic feet per day (bcf/d) to global LNG supply. That’s on top of the five U.S. projects now under construction with eight bcf/d slated for service between 2019 and 2022, and four more already permitted but not yet under construction with another seven bcf/d of capacity. As a result, Bloomberg predicts a capacity utilization rate in the 85 percent range, which would bring growth of U.S. natural gas input and LNG output to about 30 bcf/d.

If that much new gas is produced and can find global customers, U.S. natural gas production from shale, now at 56 bcf/d, would increase more than 50 percent by 2030, even before adding in growing pipeline exports to Mexico and increased U.S. consumption.

On the demand side, the new capacity would be chasing a global LNG market that will grow from 42 bcf/d today to 52 bcf/d in 2023 to 65 bcf/d in 2030, of which 39 bcf/d is now uncontracted. Bloomberg also estimates that project developers will need to reach final investment decisions (FID) by 2020 to be able to sign supply contracts and have projects built and operating in time to fill post-2025 demand. On the pipeline side, seven major pipeline projects are integral to their related LNG projects and therefore are also dependent on the FERC permits. They add up to 678 miles of large-diameter pipe, all in Texas and Louisiana except for Pacific Connector in Oregon feeding the Jordan Cove project.

In its letter to the president, EEIA also asked him to expedite sending his nominee for FERC commissioner to the Senate. That post will be essential to the continued approval of pipeline projects. Connecting the Dots will continue to update members on that important nomination.