Oil inched up slightly on…
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The abundant supply of natural gas from just a few shale fields has changed the natural gas landscape in the US, meaning that a lot of the traditional natural gas pipelines, which don’t run near the new fields, are no longer needed, or a running at far lower capacity as demand for their use has dropped.
Fortuitously, the decline in demand for supplying natural gas along these routes has coincided with an increased demand for transporting crude oil. Putting two and two together, the pipeline companies are looking to convert their natural gas pipelines into oil carriers.
Another benefit of converting existing gas pipelines to transport is the avoidance of drawn out legal and bureaucratic battles to achieve permission to build new pipelines. Ken Beckman, and energy analyst at International Gas Consulting, said that “the Keystone Pipeline approval has been so painful that the ability to convert something in the ground that already has right-of-way approvals is exceedingly appealing.”
TransCanada has announced that it will make a decision early next year as to whether it will convert part of its natural gas mainline to deliver light sweet crude from North Dakota to refineries in East Canada and the US. The pipeline is no longer in demand as production from the Marcellus and Bakken plays continues to increase, reducing the demand for gas from Alberta.
Crude oil production from the Bakken in North Dakota has reached record levels and looks set to continue growing. Kinder Morgan are thinking of converting the Pony Express Pipeline from natural gas to crude, with deliveries predicted to start around the end of 2014.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com