Growing domestic and export demand for Permian’s natural gas is pushing pipeline developers to invest in new pipeline capacity in the U.S. Gulf Coast.
Chemical and manufacturing industries and data centers looking for reliable energy supply drive increased domestic consumption, while the booming LNG exports from the Texas and Louisiana coasts, and at least half a dozen new export plants expected to start up by the end of the decade, are prompting new-built or expanded links to feed gas to the LNG facilities.
With a favorable in-state regulatory landscape in both Texas and Louisiana, and with the Trump Administration supporting the U.S. energy dominance, it’s no surprise that many projects for new or expanded pipelines are on track to enter into service in the coming months.
Next year, a total of 12 projects for new or expanded gas pipelines are set to be completed in Texas, Louisiana, and Oklahoma. These projects are set to boost the U.S. Gulf Coast region’s capacity to transport natural gas by 13%, per data compiled by Bloomberg on the basis of EIA estimates.
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That would be the biggest expansion of pipeline capacity in one year since the dawn of the shale gas boom in 2008.
There has never been a better time to be in the business of building natural gas pipelines in the United States, executives at pipeline giants say.
U.S. natural gas supply is rising, domestic and export demand is soaring, and the U.S. federal regulatory landscape has shifted dramatically in favor of new oil and gas infrastructure projects.
Companies have committed $50 billion worth of investments in new gas pipelines that would add 8,800 miles of new pipeline in the United States, energy consultants Wood Mackenzie say.
Unlike in previous cycles of massive gas pipeline expansions, when producers led pipeline investment to reach demand markets, this time the buildout is being led by LNG exporters, utilities, and data centers, WoodMac noted.
In the past, “Pipeline development was the unsung hero connecting low-cost resources to markets,” the energy consulting firm says.
“Now we’re seeing a fundamental shift: demand pull from LNG exporters and power companies is driving new pipeline investment, moving away from the traditional producer-led model.”
U.S. LNG exports are surging to record highs, with more export projects expected to start up by the end of the decade.
America’s electricity demand is also soaring, thanks to the onshoring of manufacturing and the sky-high energy consumption of data centers.
At the same time, the booming oil production in the Permian is boosting the supply of natural gas as a by-product, too. And producers struggle to make use of the gas with limited available spare pipeline capacity.
In recent months, prices at the Waha gas hub in West Texas have crashed into negative territory multiple times, and flaring has soared as producers have been forced to pay offtakers to get rid of the natural gas. All because operational pipelines are not enough to ship the gas to places where it’s needed—power plants and LNG export facilities.
New pipelines are set to address part of the bottleneck problem and send the gas to demand centers—be it data centers, manufacturing, chemicals production, or LNG exports.
Earlier this week, ExxonMobil agreed to buy 40% in the new Bahia natural gas liquids (NGL) pipeline from Enterprise Products Partners as producers and pipeline operators expand gas takeaway capacity in the Permian basin.
The expanded pipeline, Cowboy Connector Pipeline, will connect Exxon’s growing production in the Permian to U.S. Gulf Coast refining and chemical facilities and enable access to export logistics to serve markets around the world, the supermajor said.
Canada-based pipeline giant TC Energy early this month said it expects North American natural gas demand to surge in the medium to long term, thanks to soaring U.S. LNG exports and “unprecedented power demand” from data centers and coal-to-gas conversions.
TC Energy has 58,100 miles of network of natural gas pipelines, which supplies more than 30% of the natural gas consumed daily across North America’s markets.
“Our latest forecast expects North American natural gas demand to increase by 45 Bcf/d by 2035, primarily driven by a tripling of LNG exports and unprecedented power demand from data centres and coal-to-gas conversions,” TC Energy’s president and CEO, François Poirier, said in a statement accompanying the third-quarter results.
By Tsvetana Paraskova for Oilprice.com
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