markets | Shale gas Right: This cross section
shows a typical shale gas
drilling set up in the Marcel- lus region of the US
will be coming on stream by the end of 20-13 and will provide an extra 7 tcf per day per day of pipeline capacity. The completed schemes could connect at least 1000 new drilled wells. Development of the Marcellus shale gas fields -
which extend through the states of New York, Pennsyl- vania, West Virginia and Ohio - has been constrained by insufficient pipeline capacity to reach major markets such as New York. But what is a problem for shale gas producers and potential consumers is an opportunity for pipeline construction companies, installers and the pipeline coating industry. Lack of pipeline capacity has led to recent announcements for construction of around 1,200 km of new gas pipelines worth around $3 billion to connect shale regions such as the Marcellus field with the rest the country. Proposals for shale gas pipelines such as the 24 km $800m natural gas pipeline into New Jersey and Manhattan, or the $750m proposal to access parts of New York and Boston await approval.
Reversing gas flow This expansion of the domestic and transit pipe infra- structure is reversing the traditional gas flow patterns from the south of the US to the major consuming markets of the North. Once complete, the new capacity will provide access to at least 5% of US daily gas supply. Given these opportunities, it is not surprising that
companies such as Bredero Shaw are focusing attention on the North American market. Bredero Shaw business development manager EMEA Jonathan Brum says his company is looking to “the Americas for now and potentially Algeria, and waiting to see what happens in Asia Pacific”. The shale gas revolution has stimulated many
technical innovations, most notably in the use of hydraulic fracking and horizontal drilling as well as in new product development in pipelines. However, in the short term the US shale gas industry
has become a victim of its own success. The price of gas in the US has fallen to a decade-low and drilling activity has slowed. After four years of rapid growth in Marcel- lus, the number of drill rigs in Pennsylvania has fallen 29% since August 2011, according to data from the Pennsylvania Department of Environmental Protection. Low gas prices make drilling unprofitable. ExxonMobil CEO Rex Tillerson recently used the colourful phrase: “We are losing our shirts today.” The decade low price may slow down the $226bn
expected splurge of spending on pipelines, storage, processing facilities and power plants – most of which was slated for the five years until 2017 – but will not halt it. Improved pipeline access to the Marcellus, Eagle
14 PIPELINE COATING | November 2012
Ford and Utica shale gas supplies has helped reduce the price of gas on the supply side. However, this price slide will, in time, be tempered by the increased demand for gas resulting from the ongoing switch away from coal to gas by the US power sector and also by industry. The shale gas revolution has also spawned an
industrial renaissance. Shale gas output is not only being used to fuel power stations and heat homes but is increasingly being processed to methanol and ammonia feed stocks for production of steel, plastics and chemi- cals. This increased domestic demand for gas will also, in time, increase its price. There is also the effect of diminishing supply caused by the steep and unpredict- able decline rates of individual shale gas wells during this price slump when drilling activity is in decline.
Investment peaking An informal KPMG poll of shale gas industry executives taken in May of this year (included in its Shale Gas: Global M&A Trends study) also revealed that 52% of respondents expect US investment in domestic shale gas to peak with investors looking across the border for replacement reserves. Domestic supply may be reduced by the possible initiation of exports of shale gas. It is not clear whether the US Congress will permit an export trade, which, while lucrative for investors, would raise domestic gas prices. What is clear, however, is that prices will rise again and when that price revival occurs pipeline construction, coatings and installation activity will also pick up. In contrast to the temporary relative stagnation in the US due to the collapse in prices and profits for drillers, Mexico’s shale gas output is expected to increase rapidly from its current 6 bcf/d (billion cubic feet per day) output. As a result of this predicted expansion, Mexico is scrapping plans for ten nuclear power plants in favour of gas power stations, accord-
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