Saturday, October 22, 2011

"Refashioning the Continent's Energy Arteries" Shale Gas is Fueling A Pipeline Construction Boom

CANADA GLOBE AND MAIL -- "Spectra Energy Corp. (SE-NYSE) is driving North America’s pipeline construction boom into the heart of New York City, part of a massive industry push to connect previously untapped shale gas and oil reserves to under-served markets. From the growing Alberta oil sands to booming production in Pennsylvania’s Marcellus shale gas reserves, new fuel sources are prompting pipeline companies to refashion the continent’s energy arteries.

Houston-based Spectra Energy Corp., for example, is spending $800-million to lay a mere 15 miles of natural gas pipeline into Jersey City and Manhattan.  Spectra’s pipeline extension is a key part of energy strategies embraced by the State of New Jersey and New York Mayor Michael Bloomberg to switch from heating oil to cheaper, cleaner-burning gas.

Spectra chief executive officer Greg Ebel said the pipeline project – so costly because it traverses such a densely developed area – could save consumers in the New York City area more than $250-million a year on their energy bills. It’s just one example of the vast opportunity for North American pipeline companies as producers use modern extraction techniques to boost production of shale gas and tight oil structures.

“I think we’re just at the early stages of really understanding just how powerful a resource this can be in the United States and in Canada,” Mr. Ebel said in an interview. Spectra – which owns Ontario’s Union Gas local distributor as well as pipelines and processing plants in western Canada – has a $5-billion capital expenditure program planned for the next five years."

7 Comments:

At 10/23/2011 10:16 AM, Blogger VangelV said...

Given the fact that the producers need $7.50 gas to break even how do we expect to have enough gas produced to ensure a decent return on the capital invested?

 
At 10/23/2011 10:49 AM, Blogger Buddy R Pacifico said...

Spectra Energy will be spending about $10 every centimeter to bring nat gas to Manhatten. This might indicate the big $ to made from shale gas are in the pipelines.

 
At 10/23/2011 11:20 AM, Blogger Benjamin said...

Producers will figure out how to produce shale gas for less and less, or go out of business. If enough go out of business, then the price might come up.

But they may figure out how to make money at the current price. They have incentives to survive.

That is the private-sector: they get better and cheaper all the time.

Not so for our federalized military---as a tax-funded public agency, it only becomes more expensive and less competent all the time.

 
At 10/23/2011 6:51 PM, Blogger Craig said...

Given the fact that the producers need $7.50 gas to break even how do we expect to have enough gas produced to ensure a decent return on the capital invested?

We don't. It's not our problem, either, since investment in the project is voluntary. Why do you care?

 
At 10/23/2011 8:19 PM, Blogger VangelV said...

We don't. It's not our problem, either, since investment in the project is voluntary. Why do you care?

I don't care because I can make money even as the companies blow their brains out. My point is that Mark is being far too optimistic because he does not account for the actual reality.

 
At 10/23/2011 8:20 PM, Blogger StVIS said...

"We don't. It's not our problem, either, since investment in the project is voluntary. Why do you care?"

I think VangeIV's point is shale gas's price is below the necessary price to sustain adequate investment. While the glut has led to low prices which is good for consumers, eventually, something will have to give. Based on the high drilling costs and the wells' steep depletion rates, it appears to me the price of natural gas will need to increase for shale gas to be practical.

VangeIV's not the only one pessimistic of shale gas's viability in the low price enviornment: Jim Chanos recently mentioned shale gas is currently uneconomical.

 
At 10/24/2011 11:48 AM, Blogger bart said...

Frakking & environmental issues & hidden costs... nothing to see here, move along.

 

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