Natural Gas and CO2 Pipelines Advance
This June has seen progress for natural gas and pipelines. Two proposed new natural gas lines gained FERC approval, a very big LNG project with an associated pipeline moved closer to final investment decision, and two major new carbon capture and CO2 pipeline projects moved forward.
NATURAL GAS PIPELINE PROJECTS
WBI Energy, Inc's North Bakken Expansion project was granted a FERC certificate June 3, green-lighting this 82-mile, .25 bcf per day project in western North Dakota, connecting Bakken natural gas to TC Energy's Northern Border Pipeline which supplies customers in the US Midwest. The line will further enable Bakken crude producers to reduce or eliminate flaring of methane from oil wells. WBI expects the line to be completed by the end of this year at a cost of $260 million.
Just one day prior, on June 2 FERC also approved Enable Midstream's Gulf Run Pipeline in Louisiana, a 134-mile, $540 million, 1.7 bcf/d project, planned for completion in late 2022. Most of its gas is eventually destined for the Golden Pass LNG export terminal now under construction on the Texas Gulf Coast.
Another LNG-dedicated pipeline, and it's associated LNG export terminal, also made major headway last week. Tellurian's Driftwood LNG project landed its second major offtake customer in two weeks, with LNG trader Vitol agreeing to take 3 million tons of Driftwood LNG per year for ten years. This deal followed a similar one a week earlier with another trader, also for 3 million tons per year. Analysts suggest the two deals put Tellurian very close to being able to secure the financing necessary for a final investment decision and construction start on the $15+ billion terminal and its associated $2.2 billion, 90-mile, 4 bcf/d pipeline from Tellurian's Haynesville gas fields to feed the terminal.
The two LNG-related projects underscore the growing strength of the US role in the global LNG market as Asian customer countries' local gas production declines while their programs to replace coal-fired generation with natural gas move forward. US exports have grown rapidly, hitting a new monthly high in March, and will continue to strengthen as new projects come online over the next several years. This bodes well for continued strength in both upstream and midstream infrastructure development as more and more feed gas and midstream capacity will be needed to supply this market.
CO2 PIPELINE PROJECTS
Opportunities for midstream infrastructure appears closer on the carbon capture (CCS) infrastructure front, with nearly simultaneous announcements from two major new CO2 pipeline system developers in the upper Midwest.
The first comes from Navigator CO2 Ventures, and affiliate of Navigator Energy Services. They have announced, and recently held a non-binding "open season", for a $2 billion, 1,200-mile CO2 gathering system bringing CO2 captured primarily from ethanol refineries in Iowa, Nebraska, South Dakota and Minnesota to an underground storage facility in Illinois. It has begun route planning and is in discussions with landowners, according to Iowa media reports.
The second project in the works is from Summit Carbon Solutions, gathering up to 10 million tons annually of CO2 from biorefineries in the midwest, and transporting it to underground storage in North Dakota. Estimated at at $4 billion, it is slated to begin operation in 2024. The company has engaged Wood, PLC to performing pre-FEED (Front End Engineering and Design) analysis on the carbon dioxide pipeline network to determine optimal size, routing, and design.
Both CCS projects, and others to follow, will benefit if several pieces of bi-partisan legislation now pending in Congress advance. The SCALE Act provides government-supported financing for CO2 pipelines; the CATCH Emissions Act would increase the federal tax incentive for captured and sequestered CO2 from $50 to $85 per ton, and the Carbon Capture Utilization and Storage Tax Credit Amendments Act substantially extends the time that qualifying CCS projects have to commence construction in order to qualify for the tax credit. EEIA is closely monitoring, and will engage in support of all three measures when they begin to move through the legislative process.
Bottom line: beyond the drumbeat of opposition and adverse media coverage, natural gas and other natural gas-sourced fuels such as hydrogen will remain critical to Americas energy and to a burgeoning global energy export market. With both CO2 and hydrogen transport capacity as the key to lowering carbon dioxide emissions, there remains a bright future for those who build, supply and operate pipelines.
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