By increasing oil prices dramatically during much of the current decade, OPEC and other oil producers essentially guaranteed massive investment in competing sources of energy. While much of the media’s attention has focused on additional oil drilling and new or exotic technologies not previously used in energy generation, such as vegetable oil, natural gas has accumulated investments and emerged as a generator of substantial construction opportunities.
According to the Energy Information Administration (EIA), U.S. natural gas pipeline construction activity accelerated in 2007 even before oil prices topped $100/barrel. Capacity additions to the natural gas pipeline grid totaled nearly $14.9 billion cubic feet of daily delivery, making these additions the largest of any given year in the EIA’s 10-year database. Additionally, in 2007, approximately 1,700 miles of pipeline were installed—greater than in any year since 2003.
EIA also notes the cost of pipeline construction activity in 2007 is estimated at $4.3 billion for 50 completed projects. These expenditures represent an increase of 87 percent over the cost of completions in 2006. Importantly, the boom will not end soon. The expansion cycle for natural gas pipeline construction is occurring just as development of the natural gas resource base in northern and eastern Texas proceeds, particularly the Barnett Shale and Bossier Sands formations. Barnett was the first shale field to undergo major development, and gas production there is up tenfold since 2001. Per EIA, it now produces 7 percent of the nation’s supply of natural gas.
Drilling is on the rise in the Rocky Mountains, too. EIA reports that projects completed in the Rocky Mountain area accounted for 26 percent of all new natural gas pipeline capacity installed in 2007, and projects completed in Texas acc
ounted for another 27 percent.
Recent discoveries of natural gas in the Marcellus Shale formation in Appalachia, which stretches from western New York to Virginia, are believed to be even larger than the Barnett Shale.
According to a recently released report from Navigant Consulting, as much as 842 trillion cubic feet of retrievable gas in shale could exist around the country—enough to supply roughly 40 years of natural gas at today’s rate of consumption.
Commercial and industrial contractors considering entering the natural gas industry—but worried about a reversal of fortunes for the sector—should note that shifting government policies suggest natural gas will be a long-term winner. According to
The Wall Street Journal, natural gas providers are spending millions of dollars on advertising to induce Californians to pass a ballot initiative (Proposition 10) that would permit the state’s government to invest in the currently limited market for natural gas-fueled cars and trucks. Should the California ballot initiative pass, as many as a million vehicles fueled by compressed natural gas could wind up on the state’s roads and freeways.
No opposition has been levied against the proposal, which would authorize California to sell $5 billion in bonds to fund rebates of $2,000 to $50,000 to people who purchase natural gas-powered vehicles. Some of the money also would be set aside to finance research, development and production of renewable energy technology and education. The plan would cost the state $9.8 billion over 30 years. Among the most prominent supporters of Proposition 10 are Texas billionaire and oilman T. Boone Pickens and Aubrey McClendon, chief executive of Chesapeake Energy Corporation.
At the federal level, Democrats in Congress "are getting behind natural gas," according to
The New York Times, which portrayed natural gas as an alternative fuel for transportation that can serve as a stopgap until renewable sources of energy become economical on a larger scale.
Given the discoveries of natural gas in recent years, it is possible gas prices will remain competitive going forward, increasing utilization and associated construction activities.