Billions Needed To Meet Long-Term Natural Gas Infrastructure Supply, Demands

By Rita Tubb, Managing Editor | April 2009 Vol. 236 No. 4

Billion $ in Natural Gas Pipeline, Storage, and Gathering Infrastructure, 2009-2030

Projected growth in North American natural gas supplies and market growth in the U.S. and Canada will require billions of dollars of additional investment in pipeline, storage and other midstream infrastructure through 2030, according to a new study released by the Interstate Natural Gas Association of America (INGAA) Foundation Inc.

The Natural Gas Pipeline and Storage Infrastructure Projections Through 2030 study, prepared for INGAA by ICF International, analyzes future natural gas infrastructure requirements under various market scenarios anticipates a range of investment in infrastructure over the next 20 years, primarily to attach increased domestic natural gas production from unconventional shale basins and tight sands to the existing pipeline network. Anticipated market growth from the electric generation and industrial sectors as well as the potential to connect vast Arctic resources and LNG supplies to the grid also will be key drivers for additional investment, according to the study.

“The domestic supply picture for natural gas has been redrawn and experts agree we now have more than 100 years of technically recoverable gas in the U.S. and Canada,” said Gary Sypolt, chairman of the INGAA Foundation. “This study spotlights what this sea of change in domestic supply will mean for investment in additional pipeline, storage and midstream infrastructure.”

In order to forecast natural gas pipeline and storage infrastructure projects through 2030, three different projections are presented in the report: a Base Case that represents an expected view of the future; a High Gas Growth Case in which markets and policies lead to greater growth in natural gas consumption; and Low Electric Growth Case in which future electricity sales grow at a relatively slower rate.

The scenarios presented have been produced by using ICF’s Gas Market Model (GMM), a widely used model for the North American natural gas market. Each scenario makes explicit assumptions about the future. The Base Case reflects an expected outcome for U.S. and Canadian natural gas markets by considering, and, in most cases, continuing recent market trends.

While the 100-page report also analyzes a wide range of the key drivers of natural gas infrastructure and U.S. and Canadian natural gas markets, the focus of this article is primarily limited to projected natural gas consumption, pipeline mileage requirements and expenditures through 2030 and the impact of the current recession.

$130 - $210 billion midstream expenditures
In the Midstream segment, the report forecasts that approximately $130 to $210 billion will need to be spent from 2009 to 2030 on midstream natural gas infrastructure in order to meet projected market requirements (Figure 1), equating to between $6 and $10 billion per year. Approximately 80 percent of necessary midstream infrastructure expenditures will be for natural gas transmission pipelines. Expenditures on new processing facilities will account for about 8 to 10 percent of the total investment on new midstream assets. Storage and LNG infrastructure, while important for efficient market operations, are projected to account for a relatively small portion of the total future investment needs. Current LNG terminal import capacity is underutilized and can accommodate projected growth.