A proposed pipeline in Ohio just received federal approval, which could connect shale gas from the Utica basin to the Gulf of Mexico.
Eastern Ohio is home to the Utica shale, which is thought to hold around 38 trillion cubic feet of natural gas. Whereas the Marcellus shale has been the cornerstone of the shale gas bonanza in nearby Pennsylvania for several years, the Utica is a more recent phenomenon. In January 2012, drillers in the Utica produced just 155 million cubic feet of natural gas per day. But that number skyrocketed to 1.6 billion cubic feet per day as of December 2014.
One of the big hang-ups for the Utica has been adequate pipeline infrastructure. Natural gas is consumed within the region for electricity generation and as a feedstock for various petrochemical facilities such as ethane crackers. But to truly take off, oil and gas companies have sought to build pipeline networks to transport gas out of state.
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Companies have built a web of smaller pipelines to move natural gas around, but there is one massive pipeline that is within reach for drillers. Stretching from the Gulf Coast to New England, and acting as a superhighway for natural gas transit, the Texas Eastern pipeline crosses through southern Ohio. It has traditionally carried natural gas from Texas and Louisiana to major cities like New York. More recently, the gas flows are going in the other direction – taking abundant Appalachian shale gas to the Gulf Coast.
Up until now, most of the drilling in the Utica in eastern Ohio has not been significantly tied into major interstate pipeline infrastructure. But a proposed pipeline could change all of that.
A subsidiary of Spectra Energy is proposing the construction of a $468 million pipeline that would travel 76 miles south across several Ohio counties. The “Ohio Pipeline Energy Network” (OPEN) pipeline would be a crucial connector for shale gas fields to the 9,000-mile Texas Eastern pipeline, providing a gateway for Utica gas to reach well beyond Ohio’s borders. It has a proposed capacity of 550,000 dekatherms per day, and if all goes according to plan, it could be completed by late 2015.
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On December 2, the Federal Energy Regulatory Commission (FERC) – the federal regulator for interstate pipelines – granted approval for the project. The pipeline’s capacity is already fully booked with Chesapeake Energy (NYSE: CHK) signing up to ship 350,000 dekatherms, Total Gas & Power North America agreeing to 100,000 dekatherms, and Consol Energy (NYSE: CNX) and Rice Energy (NYSE: RICE) each promising to send 50,000 dekatherms through the pipeline.
To be sure, Utica shale gas is already being exported out of state. For example, some gas flows west through the Rockies Express Pipeline. But with the proposed Spectra Energy pipeline, drillers in Ohio could receive access to a much wider market, allowing them to send gas to the Gulf Coast for petrochemical industries and refining. And just over the horizon, when several liquefied natural gas export terminals begin operations along the Gulf Coast, Ohio’s natural gas could be exported abroad.
Exports of refined petroleum products from the United States have risen steeply over the last few years due to the dramatic increase in shale drilling. But the approval of LNG export terminals – and an a heavier push to scrap the ban on crude oil exports – could see unrefined crude oil and natural gas exported abroad. If and when that occurs, places like Ohio – after the construction of the pending pipeline – will be connected to the international market. That could result in much more drilling.
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By Nick Cunningham of Oilprice.com
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