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North American capacity boost

The region experienced decisive additions to oil and gas capacity in 2018, with soaring natural gas production in the Marcellus and Utica basins outpacing the infrastructure required to move it to market

Operators responded to the soaring production in North America in 2018 with a flurry of pipeline projects, and one of the most important of them commenced full operations in October—Williams' $3bn Atlantic Sunrise project began full operations October, adding 1.7bn cf/d of long-awaited pipeline takeaway capacity from the Marcellus Basin and boosting design capacity of the nation's largest-volume natural gas pipeline system by 12pc.

An expansion of Williams' Transco system, Atlantic Sunrise, included the construction of 300km of greenfield pipe within Pennsylvania, directly connecting Marcellus gas supplies in the northern part of the state with markets as far south as Alabama via the Transco mainline. It also added 19km of pipe looping, two new compressor stations and included compressor station modifications in five states.

The project increases Transco's total capacity to 15.8bn cf/d while strengthening and extending its bi-directional flow. It is significant for natural gas-consuming markets all along the East Coast, alleviating infrastructure bottlenecks and providing millions of consumers direct access to one of the most abundant, cost-effective natural gas supply sources in the country.

While Atlantic Sunrise adds takeaway capacity for Marcellus producers, there is still a need for more. The Appalachian region already represents about 27pc of total US natural gas production, and Navigant Research predicts that production could reach 38bn cf/d by 2040 to claim a remarkable 34pc of total production.

Williams has already announced another expansion to connect 580mn cf/d of Marcellus production with Atlantic Seaboard demand centers.

In another demonstration of strong demand, Transco secured binding 15-year commitments on 100pc of new capacity from its proposed Leidy South project, which includes compression and looping of existing Transco facilities in Pennsylvania and lease agreements with National Fuel Gas Supply Corp. and Meade Pipeline on the Central Penn Line.

Williams is requesting the Federal Energy Regulatory Commission (FERC) to give permission to start the pre-filing process in hopes that Leady South could be in service by late 2021.

As other Marcellus projects near completion, the US Energy Information Administration (EIA) estimated that up to 23bn cf/d of takeaway capacity would be added in 2018, including 3bn cf/d from Transco's Atlantic Sunrise, Mountain Valley and Equitrans projects, as well as:

  • Columbia Pipeline's Leach Xpress, which added 1.5bn cf/d of capacity from West Virginia on 1 January, and Mountaineer Xpress, which will add 2.7bn cf/d
  • Up to 2bn cf/d via expansion projects on TCO's Columbia Gulf and WB Xpress pipelines.
  • Rover Phase 2, which adds 3.25bn cf/d to the Midwest and Ontario, and NEXUS Pipeline, which follows a similar route to Rover with 1.5bn cf/d of new capacity.

Due to the shale gas boom, the US has also witnessed a renaissance in its domestic petrochemical industry. Cheap, readily available shale gas feedstock has allowed the country to become one of the world's lowest-cost ethylene producers. In turn, the US is building millions of tonnes of additional ethylene and ethylene derivatives production capacity. According to the American Chemistry Council's Mid-Year 2018 Chemical Industry Situation and Outlook, US chemical production is set to increase 3.4pc in 2018 and 3.6pc in 2019.

From 2017-2019, ethane consumption in the US is forecast to increase from 1.2mn bl/d to 1.6mn bl/d, according to the EIA. By the end of the decade, the US is forecast to add more than 10mn t/y of new ethylene capacity. This boom in ethylene capacity includes more than 9mn t/y of grassroots facilities, as well as more than 1.2mn t/y in ethylene capacity expansion projects. Most of the country's grassroots facilities will include derivative units. In total, US petrochemical producers will invest nearly $20bn in new ethylene capacity by 2020.

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