Dominion Resources plans $1.5 billion pipeline and processing deal for Ohio Utical shale gas

RICHMOND, Va. – Dominion Resources Inc., parent company of Dominion East Ohio Gas, is partnering with a Dallas company to build natural gas processing plants and pipelines to the plants from gas wells in Ohio and parts of Pennsylvania.

In a joint statement issued Thursday, Dominion and Caiman Energy II, LLC said they would sign a $1.5 billion joint venture by the end of the month.

Blue Racer Midstream LLC will be an equal partnership between Dominion and Caiman, with Dominion contributing existing equipment and facilities valued at about $800 million and Caiman contributing the additional funding over time, the companies said.

The development is expected to help the state’s gas and oil industry grow more smoothly because it will provide the necessary pipeline capacity and processing plants immediately to market the gas as it flows from the new wells.

The absence of gas processing plants and pipelines to newly drilled remote wells has hampered Ohio shale gas development, say analysts, creating a kind of chicken and egg situation because such expensive projects could not be built without the certainty that the wells would be drilled.

Dominion will also contribute a processing plant now under construction in Natrium, W. Va., just across the Ohio River, as well as a large diameter pipeline already connecting the plant to Dominion East Ohio’s gathering pipeline system. The plant is being built next to an older but similar facility.

Earlier this year, East Ohio converted part of its major north-south pipeline system in Ohio to move gas from Ohio Utica shale fields to the Natrium processing plant. The lines were built decades ago to move gas from West Virginia and southern Ohio to the heavy industries in Northeast Ohio, industries that have either shrunk or disappeared.

Blue Racer Midstream’s initial plan is to convert more of East Ohio’s major pipelines to “wet gathering lines” and feed the unprocessed gas from thousands of wells the industry anticipates will be drilled in the Utica shale to the Natrium plant.

The plant will clean up raw or rich gas from the wells, removing oils and then separating the more valuable industrial gases — butane, propane, and ethane — from the methane that will become heating or natural gas.

The various gases and oils can then be shipped from the plant to multiple markets, said the companies, either by truck, railroad, pipeline or barge facilities.

“The Utica shale has enormous potential to provide jobs and revenues for the local Ohio economy,” said Thomas F. Farrell II, Dominion’s chairman, president and chief executive officer, in a prepared statement.

Jack Lafield, Caiman’s chairman and chief executive officer, said Dominion “brings well-positioned assets and experienced operations for gathering, processing, fractionating and delivering natural gas and liquids produced from the Utica shale field.”

Three other similar projects are also under way.

Earlier this month, a partnership of companies led by M3 Midstream, LLC, of Houston, announced its $1 billion gas processing plant under constructionin Columbiana County is on schedule to open in May 2013. Chesapeake Energy had been part of the group but sold its share.

In early November, two Denver companies, MarkWest Energy Partners, a gas transportation and processing company, and Antero Resources, a gas producer, partnered with a Texas investment company, the Energy and Minerals Group, to build processing plants and pipelines in Nobel County. State officials estimated the initial investment at $500 million.

In July, NiSource, Inc., parent company of Columbia Gas of Ohio, announced a joint venture with Texas exploration and production company Hilcorp Energy Co. to build about 50 miles of pipeline and a gas processing plant in the state. NiSource estimated the initial cost at about $300 million. In this latest announced project, Dominion intends to contribute its existing gas gathering pipeline system with an eye toward expanding its capacity to move at least 2 billion cubic feet of natural gas per day.

SOURCE: http://www.cleveland.com/business/index.ssf/2012/12/dominion_resources_plans_15_bi.html

NextEra Requests Bids to Build Third Gas Pipeline Into Florida

NextEra Energy Inc. (NEE)’s utility Florida Power & Light Co. said it’s requesting bids to build a third natural gas pipeline into Florida to meet growing demand from power generators.

The approximately 700-mile (1,125-kilometer) pipeline would deliver gas from western Alabama to a new hub in Central Florida that would connect to FPL’s gas system in Martin County, the Juno Beach, Florida-based company said today in a statement. The line would deliver about 400 million cubic feet of gas a day starting in 2017, and would increase after that, the company said.

Bids for the project, which will consist of two segments, are due by April 3, 2013, Richard Gibbs, a spokesman for FPL, said today in a telephone interview. The “multibillion dollar” pipeline will need federal, state and local approvals, Gibbs said.

Florida uses more natural gas to produce electricity than any U.S. state other than Texas and 60 percent of the state’s power is generated by gas plants, the company said.

SOURCE: http://www.bloomberg.com/news/2012-12-19/nextera-requests-bids-to-build-third-gas-pipeline-into-florida.html

Natural gas pipeline planned east of Calhan, CO

A planned 435-mile pipeline that will carry natural gas liquids from northern Colorado to Texas will cut through eastern El Paso County.

Construction of the pipeline, which will cross underneath Highway 24 about five miles east of Calhan, is expected to begin in the second quarter of next year and be completed by the end of 2013. The gas line will originate near Greeley and end close to Skellytown, Texas, near Amarillo. From there, the various natural gas liquids will be separated and used to supply homes and businesses with propane and other products, or sent overseas.

Natural gas liquids are byproducts of natural gas when split into separate products.

Byproducts include ethane, butane propane and natural gasoline, said Rick Rainey, vice president of public relations for Houston-based Enterprise Products Partners. He said a large portion of the natural gas liquids transported through the pipeline will come from around Denver International Airport.

The pipeline is being constructed by Front Range Pipeline, a company owned by Enterprise Products, Anadarko Petroleum and DCP Midstream. Each owns a third of the pipeline, Rainey said.

The pipeline will run through right-of-ways purchased from private landowners or the federal Bureau of Land Management, Rainey said. The company has contacted all of the affected property owners from Colorado to Texas and has contracted with about two-thirds of them, he said. Rainey did not know how many Colorado property owners had signed contracts.

Building the pipeline could create more than 2,000 jobs from Colorado to Texas during the construction period, Rainey said. He did not know how many of those jobs would be in the Colorado Springs area because Front Range has not completed contracting with construction companies.

The pipeline’s construction also will add dollars to the local economy through the contracting of local suppliers, hotels, restaurant, vehicle repairs and fuel purchases, Rainey said. Once the pipeline is finished, Front Range must pay property taxes to El Paso and other counties.

The 12-to-16-inch pipeline is expected to transport 150,000 barrels of natural gas liquids a day initially  and can be expanded to 230,000 barrels per day. Some of the liquids could be shipped overseas after reaching Texas.

“The U.S. is a global competitor in the propane market,” Rainey said, “and the supplies for propane exist in good portions in Colorado, so there is that need to get it to the Gulf Coast.”

Front Range hopes to build the majority of the pipeline, which will be buried, parallel to existing transportation routes and not in “undisturbed areas of wilderness,” Rainey said. He declined to state the project’s cost.

Read more: http://www.gazette.com/articles/pipeline-148561-gas-natural.html#ixzz2FVfacbqq

Investment in Canada’s natural gas sector set to rival the oil sands

Canada’s natural gas sector could emerge as an investor magnet surpassing interest in the oil sands over the next two decades, The Conference Board of Canada forecasts show.

Natural gas could attract as much as $386-billion in investments by 2035 and create 3.2 million person-years of employment (or an average of 131,460 jobs annually), says the Conference Board of Canada in a new report. This compares to $364-billion investments expected in the oil sands and equal job growth during the period, according to an earlier Board study.

“There are similar numbers on the total investment… in general we see a lot of demand for energy,” Pedro Antunes, co-author of the report, told the Financial Post. “The oil sands have already seen a lot of investments in the last few years, and going forward there will be a lot of activity, but sooner or later it will ease off as we get into production mode.”

The investment surge in natural gas will generate $940-billion in direct and indirect economic growth, including $364-billion directly to the country’s GDP over the forecast period, the Board said in a report published Monday.

British Columbia will lead the natural gas investment charge, attracting $181-billion, with Alberta garnering $154-billion from 2012-2035, the Board estimates.

The report echoes British Columbia Premier Christy Clark’s comments last week that the province’s natural gas industry will rival the oil sands in the future.

“Think about it in these terms: what oil has been to Alberta since the 1970s-80s is what LNG is going to be for British Columbia, nothing less than that,” Ms. Clark told The Canadian Press. “Energy output from LNG will likely be as big as the total energy output today from the oil sands.”

The symbiotic relationship between Alberta’s oil sands and natural gas will only strengthen in future. To fuel their rising output, bitumen producers will triple their natural gas consumption to 1,200 billion cubic feet per year by 2035.

While oil sands, power and transportation sectors will revive the country’s natural gas production, it’s British Columbia’s plans to export liquefied natural gas to Asia that would help liberate the commodity’s price.

Canadian natural gas prices are trailing near a decade-low at $2.88 per million British thermal unit, and production is falling as the U.S. — the industry’s biggest customer — is in the midst of its own shale gas revolution.

While the Board does not expect all the planned LNG projects to proceed, the new industry will need another 1,200 billion cubic feet per year of natural gas by 2035 to satisfy energy-thirsty Asian markets.

Such market access will be crucial to lift commodity prices as the oil and gas sector is currently beholden to the U.S.’s energy revolution, says Michael Binnion, president of Questerre Energy Corp., with interests in Quebec and Alberta shale deposits.

“If you take what we export to U.S. in natural gas discounts and discount on oil price, it is $20-billion to $30-billion we are sending to America in the form of subsidies,” Mr. Binnion said at an oil and gas conference last week. “If I was a citizen of Alberta or federal government and getting $30-billion less royalties and taxes…., there is reason for everybody to be concerned about infrastructure issues.”

While Alberta and B.C. will rake in majority of the natural gas royalties, taxes and revenues, Ontario and Quebec will also see their manufacturing industries benefit from the boom’s trickle-down effect.

Things could look even rosier for Quebec if the province lifts a moratorium on shale gas drilling. The Board expects Quebec to attract more than $6-billion in investment from 2020 onwards if the ban is lifted.

While the Board’s forecast is “prudent” in its assumptions, Mr. Antunes says there are other downside risks that could derail investment potential, such as LNG projects which may not go ahead — although it it unlikely.

Another key risk is a collapse in crude prices due to the North American output glut, similar to what happened in natural gas.

“There are certain risks that oil prices could be weaker and thus, investments in the oil sands, which are highly natural gas-intensive, affect a lot of the demand for natural gas,” Mr. Antunes says.

SOURCE: http://business.financialpost.com/2012/12/17/canadas-386b-natural-gas-investments-set-to-rival-oil-sands/

Plains All American to buy terminals for $500M

HOUSTON (AP) — Plains All American Pipeline LP said Wednesday that it will buy rail terminals used to store and transfer crude oil for $500 million to help it prepare for increased U.S. oil production.

Plains operates oil pipelines across the country. By owning the terminals, it will also give the company more control over the oil it moves and allow it to avoid paying storage costs at rented terminals.

The Houston company is buying the terminals from U.S. Development Group, a privately held company that owns crude oil, petrochemical and ethanol terminal and storage centers across the U.S. and Canada.

The deal includes three terminals in the oil country of Texas, Colorado and North Dakota, one rail unloading terminal in Louisiana and another unloading terminal that’s being built near Bakersfield, Calif. Crude oil loading capacity from these terminals is expected to total about 250,000 barrels per day.

The Plains deal comes as U.S. oil production grows. Monthly crude production reached its highest level since 1998 in September, said the Energy Information Administration on Tuesday. Production is growing the fastest in Texas and North Dakota, where two of the acquired terminals are located.

The United States could overtake Saudi Arabia as the world’s biggest producer of crude oil by 2020, driven by high prices and new drilling methods, the International Energy Association said last month.

Read more: http://www.sfgate.com/business/energy/article/Plains-All-American-to-buy-terminals-for-500M-4096109.php

Warding off Corrosion Alaska’s Aging Pipelines – A New Growth Industry

On Tuesday, the University of Alaska-Anchorage held a grand opening for its new BP Asset Integrity and Corrosion Lab. The new facility, made possible by a $1 million gift from BP, expands the university’s mechanical engineering program.

The lab’s birth comes as Alaska’s oil pipeline and the corrosion experts who know how to diagnose and manage it are both aging. It holds promise for both technological innovation and developing a home-grown workforce to keep pipelines in good working order for decades to come.

“Having well-trained engineers on staff that are very familiar with the fundamentals of corrosion is a great step in the right direction,” said Matt Cullin, a mechanical engineer and assistant professor at UAA, who will serve as the lab’s director.

Costly corrosion

The grand opening comes one day after BP’s court-ordered deadline to pay the state of Alaska $255 million for money the state lost in revenue when more than 5,000 barrels of crude oil spilled on the North Slope in 2006, forcing a pipeline shutdown.  The company’s Alaska and national reputation has been tarnished by spills, ensuing lawsuits, and criminal charges – all evidence of greater scrutiny by federal regulatory agencies.

Corrosion-weakened pipes caused the North Slope pipeline failure. The company also had to pay a $20 million criminal judgment and a separate $25 million civil judgment in connection with the spills. When the civil judgment was ordered in May 2011, it was the largest per barrel penalty levied by the Department of Justice to date.

In the years since, BP has spent even more money on its Alaska operations at Prudhoe Bay, the nation’s largest oil field. Replacing the old system that leaked and caused the spills cost upwards of $500 million. The company has tripled the amount it spends each year on corrosion prevention and maintenance – up to $120 million in 2011. It’s renovated other lines and doubled its pipeline inspections to 160,000 per year, 110,000 of which specifically look for corrosion.

“BP has spent the last several years systematically strengthening safety and risk management based on lessons learned from 2006. We have made significant improvements in safety and reliability on the North Slope,” said Dawn Patience, spokesperson for BP.

The $1 million gift to UAA for an Alaska-based corrosion lab offers another investment in the long-term maintenance and management of Alaska’s pipelines.

“This will dramatically increase the capability of integrity testing in Alaska — providing results in a timely manner (and) providing students with the opportunity of hands-on research and internships in multiple industries in Alaska – not just oil and gas,” Patience said.

‘Driving a Pinto’ 

”Corrosion is going to be the biggest single threat to flow assurance in the next century,” according to Cullin, who likens the condition of Alaska’s pipeline infrastructure to an old car. “We’re driving a Pinto around.”

To keep the old car going, you could rebuild it each month to keep everything in working order. But that’s not financially viable. Pipeline management, as with the car, is about striking the right balance, Cullin said.

Preventing corrosion isn’t as simple as replacing a bad alternator. “Every day,” Cullin said, “corrosion is trying to outwit you.”

The trans-Alaska pipeline and the pipelines of Prudhoe Bay that feed it have been in place more than three decades, moving the oil that for decades has largely paid for Alaska’s state government. New pipeline-integrity engineers will continue to be in demand.

In addition to oil and gas, corrosion experts are needed in the aviation, military, shipping, fisheries and water-wastewater industries.

Alaska’s ‘corrosion crime lab’ 

The crown jewel of Cullin’s program is a $250,000 scanning electron microscope capable of making tiny details visible to the human eye. It will be able to detect minute surface changes in sections of pipe, and also identify particles.

“I kind of think of this as the corrosion crime lab for the state of Alaska. It’s kind of like CSI Sherlock Holmes style. We want to track down the root cause of the failure,” Cullin said.

Answering those mysteries could determine if a corrosion problem was due to not enough inhibitor injected into the pipeline, or to a surface film that may have prevented the inhibitor from working, or if the pipeline’s main material was faulty from the start.

The exciting part for Cullin is that it will give all levels of academics the opportunity to get involved – undergraduates, graduates and faculty. The idea is to create a lab where industry-funded research projects take place, and also where state and government entities turn for new information and ideas. Through a “corrosion track” – a series of two courses broken up by field experience over the summer – students in engineering and other relevant disciplines should be able to hit the ground running after graduation, Cullin said.

Cullin expects the corrosion classes will have a lasting impact on his students, something he calls the “corrosion glasses” effect. Regardless of what discipline they enter, he’d like to see them always have an eye out for whether designs or other new ideas adequately account for corrosion control. “I absolutely feel that they will match up to anybody from any other school with their fundamental knowledge about corrosion,” he said.

In addition to cultivating a home-grown work force, there’s another upside for industry: a quicker turnaround on failure analysis when something goes wrong. Instead of packing up parts and sending them to Houston, the material could head to UAA.

“It’s really going to be an all-purpose facility,” Cullin said. His goal is for the lab to become self-sustainable within five years, paying for itself through private or government research projects and possibly renting out time on the new microscope, which other departments have already expressed interest in.

SOURCE: http://www.alaskadispatch.com/article/warding-corrosion-alaskas-aging-pipelines-new-growth-industry

Canada to Build Oil Pipeline to Serve Asia

‘The U.S. market will not be large enough to accommodate all of Canada’s oil exports,’ said Natural Resources Minister Joe Oliver.

Canada is scrambling to build an expansive new oil pipeline network to reach new markets including Asia as its sole customer, the United States, hikes production, aiming to become the world’s top exporter.

Canada holds the third-largest oil reserves in the world but 98% of its oil exports and 100% of its natural gas shipments go the United States. This has made Canada the top energy supplier to its neighbor.

But that could soon end.

The United States is seeing a boom in shale gas and offshore oil production as it strives for energy independence, and the International Energy Agency recently said the U.S. could become the world’s top oil producer by 2020.

This week, Canada’s Natural Resources Minister Joe Oliver urged a fix: build more pipelines to move oil from landlocked Alberta province to both refineries in eastern Canada and the Pacific coast to fill tankers bound for Asia.

“The U.S. market will not be large enough to accommodate all of Canada’s oil exports,” Oliver said.

“By 2035, Canadian oil exports will be 4 million barrels per day, but total US imports will only be 3.4 million barrels per day. This highlights the need for Canada to access new markets,” Oliver added.

The federal government has put its weight behind several new pipeline projects, but the initiatives face stiff opposition from environmentalists and regional authorities.

“We’re already lacking outlets for the oil now being produced — existing pipelines are at capacity,” said Marco Navarro-Genie, a researcher at Calgary-based Frontier Centre for Public Policy.

“We’re forced to sell our oil at $22 below market value because we can’t get it to any market outside of North America,” Navarro-Genie said.

READ MORE: http://www.industryweek.com/energy-management/canada-build-oil-pipeline-serve-asia