American Oil and Gas Reporter - March 2017 - 72

SpecialReport: Midstream & Infrastructure Update
In both scenarios, 70 percent of new
wells are expected to be oil and 30 percent
gas, but more than 820,000 new wells
would be completed by 2035 in the high
case compared with 682,000 in the low
case. The high case projects natural gas
production increasing 1.8 percent annually
(topping 130 billion cubic feet a day by
2035), with natural gas liquids production
tracking gas output to grow from 4.2
million to 6.5 million barrels a day during
the 20-year period. This compares with
110 Bcf/d and 5.7 million bbl/d, respectively, for the low case.
Although the study analyzed natural
gas, NGL and crude oil infrastructure,
this article focuses on the findings related
to natural gas and NGLs. This includes
gas gathering and lease equipment, processing, pipeline transportation, storage
and liquefied natural gas export facilities,
as well as NGL pipeline transportation,
fractionation and export facilities.
Driven By Shale Plays
Shale gas production growth is forecast
to be robust, motivating the development
of new natural gas infrastructure. In fact,
onshore shale plays should account for
two-thirds of all North American gas
production by 2020, growing to nearly
75 percent by 2035. A substantial portion
of that new natural gas production will
continue to contain relatively high liquids
contents. Associated gas production from
oil wells could reach as high as 19 Bcf/d
by 2035, which would represent an increase of 2.6 Bcf/d.
In total through 2035, North American

natural gas transportation capacity additions are projected to range between 44
Bcf/d and 58 Bcf/d, with a midpoint
value of 51 Bcf/d. For NGL infrastructure,
capacity additions are projected to range
between 1.1 million and 2.3 million bbl/d,
with a midpoint of 1.7 million bbl/d (incidentally, the estimated midpoint value
of oil pipeline capacity additions during
this period is 5.7 million bbl/d).
With the aggressive development of
unconventional resources, the industry
invested $40 billion-$50 billion annually
in infrastructure projects between 2010
and 2015. The high level of natural gas
and NGL infrastructure construction continued in 2016, despite the low commodity
prices. Nearly half of all new natural gas
capacity additions originate in the Marcellus/Utica region. Significant new capacity also is being built in the Gulf
Coast/Southwest area, associated mostly
with LNG and Mexican exports.
Marcellus and Utica transport capacity
is forecast to increase as much as 12
Bcf/d through 2020, partly to support
natural gas exports. Between 2020 and
2035, another 15 Bcf/d of incremental
capacity would be built across North
America in the high-case scenario, mostly
to satisfy growth in gas-fired power generation. With the low-case scenario projecting much more modest gas-fired generation growth, only about half of the
post-2020 natural gas capacity would be
added.
Capital Expenditures
Even in the low-growth case, some

FIGURE 1
Capital Expenditure Estimates for New Infrastructure ($/billion)
Low Case (2015-35)
$471 Billion

High Case (2015-35)
$621 Billion

Crude
Oil,
$190
30.6%

Crude
Oil,
$137
29.2%

Natural
Gas,
$376
60.6%

Natural
Gas,
$290
61.6%
NGL
$43
9.2%

72 THE AMERICAN OIL & GAS REPORTER

$23.5 billion a year would have to be invested in infrastructure, increasing to
more than $30 billion annually in the
high case. The total required capital expenditure investment in infrastructure
from 2015 to 2035 is estimated to range
between $471 billion and $621 billion
(Figure 1), with a midpoint expenditure
of $546 billion ($27 billion annually).
Investments in pipelines (including
both transmission and gathering lines
and compression and pumping) range
from $183 billion to $282 billion, with a
midpoint capital spend of $232 billion.
Most of the pipeline activity (more than
60 percent of the total capex invested) is
expected to be associated with natural
gas development, with much lesser investment in assets related to NGLs (less
than 10 percent) and oil (roughly 30 percent of total capex invested in pipelines).
Significant portions of the pipeline
investment will be for lease facilities infrastructure (28 percent) and gathering/processing systems (21 percent). The majority
of the expenses associated with gathering
will be spent on processing and fractionation equipment, followed by pipe, and
compressors and pumps. Transmission
and storage account for another 30 and
15 percent, respectively, of the investment
in pipeline development, the majority of
which is devoted to natural gas.
According to the study results, the
key midpoint-value metrics identified for
2015-35 include adding 296,000 miles
of gathering and transport pipelines for
oil, gas and NGLs. About 85 percent of
that total (257,000 miles) will be new
gathering lines to collect incremental
production of more than 750,000 oil and
gas well completions, with the remaining
15 percent (39,000 miles) new transmission pipeline. Total compression and
pumping horsepower needed for all gathering and transmission lines is 15.8 million, including 8.7 million for gas gathering
applications. The total capex requirement
for this midpoint level of pipeline infrastructure build-out (including pumping
and compression needs) is estimated at
$232 billion.
Significant Impacts

NGL
$55
8.8%

The metrics clearly demonstrate the
need for considerable new infrastructure,
despite the market changes that have oc-



American Oil and Gas Reporter - March 2017

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