Shale gas producers squeezed by prices that hit new three-year lows this week can look to the sky above Lusby, Md., for a sign of coming relief.
Dominion soon expects to have 50 cranes working there on its Cove Point liquefied natural gas export terminal, the company’s senior policy adviser for federal affairs, Bruce McKay, told industry leaders Wednesday in Cecil.
Five such LNG terminals coming online over the next few years, along with more exports to Mexico and an increasing conversion of coal-fired power plants to gas, will boost demand to meet the supply glut that has kept prices so low, several speakers said at the gathering.
“Demand is only going up,” Tony Cox, director of midstream business development for UGI Energy Services, said during Penn State University’s fifth annual Natural Gas Utilization Conference in Southpointe.
Low prices driven by huge shale production and limited pipelines to take gas to lucrative markets constitute the No. 1 challenge facing the industry, said Tom Murphy, director of Penn State’s Marcellus Center for Outreach and Research and an organizer of the conference.
Exports won’t raise prices alone because there’s plenty of supply. John Hilfiker, an analyst with Bentek Energy, estimated that just connecting shale wells that have been drilled but not completed could add up to 16 billion cubic feet of production per day to Appalachia’s current output of 19 billion cubic feet.
Combined with use by petrochemical manufacturers and power plants, exports present a “potential catalyst to higher prices,” said Douglas Kris, a vice president at State College-based producer Eclipse Resources.
The first five LNG terminals, starting soon with Sabine Pass on the coastal border between Texas and Louisiana, will export more than 8.1 billion cubic feet of gas per day by 2020, he said.
Cove Point is “on time and on budget” with construction 33 percent done for a 2017 launch, McKay said. That terminal will ship Marcellus gas to India and Asia.
Pipelines that can take the gas to those terminals and other demand centers on the Gulf Coast, New England, Southeast and Upper Midwest are increasingly coming online. The process was slowed by regulatory hurdles and a need for long-term commitments from both producers and users, said Glenn Koch, director of engineering and construction for pipeline builder Williams Cos.
“You need to have enough critical mass … whether it’s from producer push or market pull,” he said.
More pipelines will make it easier to ship gas over the borders to Canada and to Mexico, which Kris said “remains an excellent export market” as it switches to gas-fired power plants.
Smaller pipeline projects are taking gas right to converted power plants in Appalachia.
UGI is building a 35-mile, 20-inch line to Shamokin Dam in Snyder County. Dallas-based Panda Power Funds announced earlier in the day that it was financing the construction of the Hummel Station there on the site of a shuttered coal plant. The natural gas-fired plant will come online in 2018 and produce enough electricity to power 1 million homes.
“We’re ready to take what we’ve learned in Pennsylvania and apply it to other coal-fired projects across the nation,” Todd W. Carter, president and senior partner of Panda Power Funds, said in announcing the project.
This article was written by DAVID CONTI from The Pittsburgh Tribune-Review and was legally licensed through the NewsCred publisher network.