Underground Construction - November 2020 - 21

Natural gas prices have remained low as reduced demand has so
far outweighed lower production, but consensus estimates point to
upward price pressure later in 2020. EIA forecasts the benchmark
Henry Hub spot price will average $2.46 per MMBtu in the fourth
quarter of 2020. In 2021, it expects lower production to push the
average to $3.10.
In developed regions, demand for crude oil pipeline construction
should continue to track upstream production trends, largely driven by U.S. shale and conventional upstream projects in the Middle
East and Russia. Demand for natural gas pipelines, meanwhile, will
be influenced by a more complex range of factors, many of which
are region-specific.
Developing regions such as China and India have committed to
expanding their natural gas import and distribution infrastructures as they wean themselves off coal, and low natural gas prices
provide incentive for ongoing pipeline construction. But reduced
economic activity, even in these faster-growing regions, has
dampened demand, resulting in a supply glut that may slow the
expansion of LNG export infrastructure elsewhere in the world.

North America
The global plunge in oil and gas demand abruptly halted a surge of
pipeline construction activity in the United States, where operators were answering demand created by a decade of record-shattering shale production and soaring exports.
U.S. operators have scaled back or deferred crude oil projects to
the tune of at least 1.5 MMbpd since the lockdown began to seriously impact oil prices and production in April. Announced delays
include the Phillips 66/Plains All American Red Oak and Liberty
pipelines and the Enterprise Products Partners Midland-to-Echo
4 pipeline. Phillips 66 Partners also deferred a final investment
decision on its ACE Pipeline project and the planned expansion of
its Sweeny Hub fractionation capacity.
" Midstream companies are somewhat reticent about canceling
projects or announcing delays, so the number of such announcements has been limited, " notes Morningstar Analyst Sandy
Fielden, who looks for projects that have either passed their
planned start-up dates or are listed without completion dates in
EIA's pipeline database.
Based on those indicators, the list of impacted construction
projects includes the 650-mile, Permian-to-Brownsville Jupiter
Pipeline, Marathon's 600,000-bpd Swordfish Pipeline in Louisiana
and the Plains/Delek 150,000-bpd Red River expansion.
Legal and regulatory challenges to major pipeline projects have
steepened the decline in construction activity. In July, Dominion
Energy and Duke Energy canceled their long-delayed, $8 billion
Atlantic Coast natural gas pipeline, a project that would have
delivered Marcellus Basin natural gas to the U.S. Southeast. Earlier,
Williams put its Northeast Supply Enhancement natural gas pipeline on hold after New York environmental regulators denied a key
water permit and canceled the proposed Constitution natural gas
pipeline from Pennsylvania to New York after years of opposition.
A plan to roughly double the capacity of the 570,000-bpd
Dakota Access crude oil pipeline (DAPL) was proceeding through
the approval process in early 2020, but the fate of both the
expansion and the existing pipeline came into question in July
when a federal court ordered it to be shut down and emptied due
to a purportedly faulty environmental permit. Energy Transfer is
appealing the order.

Construction of TC Energy's Keystone XL crude oil pipeline
was delayed by a court ruling, upheld by the U.S. Supreme Court
in July, requiring additional environmental review. The Calgarybased company said it remains " fully committed " to the 830,000bpd project and will look at alternatives if the U.S. permit is not
reinstated, such as pursuing individual permits for different
pipeline segments and route adjustments.
There was a silver lining to the U.S. Supreme Court ruling,
however, as it also reinstated the U.S. Army Corps of Engineers'
fast-track permitting program known as Nationwide Permit 12 for
other projects. That decision removed a roadblock that threatened
to delay more than 70 pipelines across the United States and add
up to $2 billion in costs, according to industry estimates.
Canada's Supreme Court also made rulings in 2020 benefiting
pipeline construction projects, including one that ended seven
years of legal challenges to the Trans Mountain pipeline expansion. Now under construction, that project will triple the capacity
of the 67-year-old pipeline from Alberta to the British Columbia
Coast. Completion is slated for late 2022.
TC Energy's Coastal GasLink pipeline also resumed construction
in Western Canada after a positive ruling earlier in the year. The
$5 billion (C$6.6 billion) project will move gas 416 miles from
Northeast British Columbia to the Pacific Coast, where the Shellled LNG Canada export facility is under construction.
Other notable projects still moving ahead in the United States
include the 650-mile Wink-to-Webster Pipeline, a joint venture
between affiliates of Exxon Mobil, Plains All American and MPLX.
The pipeline will transport 1 MMbpd crude oil and condensate
from the Permian Basin to the Texas Gulf Coast upon expected
completion in early 2021.
Enbridge is pursuing state regulatory approvals to replace the
U.S. portion of its Line 3 replacement project after completing the
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Underground Construction - November 2020

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