At the close of 2004, the U.S. natural gas transportation network included more than 200 mainline natural gas pipeline systems. Combined, these 107 interstate systems and more than 90 non-interstate systems account for over 297,000 miles of pipeline. Moreover, the interstate network represents approximately 148 Bcf/d of natural gas transportation capacity while the non-interstate pipelines account for at least 30 Bcf/d. During 2004, total U.S. natural gas pipeline system mileage increased by less than 1 percent while overall system capacity increased by slightly more than 4 percent.
Expansion of the U.S. natural gas transmission network slowed in 2004, both in terms of added transportation capacity and new pipeline mileage. Only about 1,450 miles of pipeline and 7.7 Bcf/d of natural gas pipeline capacity were added to the national gas transmission grid during 2004, compared with 2,243 miles and 10.4 Bcf/d of capacity in 2003. The amount of incremental capacity in 2004 was the least since 1999 when only 6.5 Bcf/d was added. During 2004, six new pipeline systems were placed in operation in the deepwater Gulf of Mexico, plus the 560-MMcf/d Cheyenne Plains Pipeline, and a 320-MMcf/d expansion of the southern leg of the El Paso Natural Gas pipeline system.
In the past few years, several major natural gas pipelines came online: the Gulfstream Pipeline, 1,130 MMcf/d560 miles, which carries natural gas under the Gulf of Mexico from gas-processing facilities located on the Gulf coasts of the States of Mississippi and Alabama to west central Florida; the North Baja Pipeline, 500 MMcf/d80 miles (in the U.S.), which exports gas to electric power plants located in Baja California, Mexico; the Questar Southern Trails Pipeline, 87 MMcf/d405 miles, which transports gas from the four corners area of New Mexico/Utah (San Juan Basin) to the California/Arizona border area; and the Guardian, 750 MMcf/d142 miles, and Horizon, 380 MMcf/d29 miles, pipelines, which expanded the flow of gas supplies between the Chicago hub and the growing market of northern Illinois and southern Wisconsin. On December 1, 2000, the $2.9 billion, 1.3-Bcf/day Alliance Pipeline from western Canada (Fort St. John, British Columbia) to the Chicago area entered service.
Columbia Gas Systems Millennium project ($700 million), which is to connect Canadian natural gas sources to New York and Pennsylvania, received FERC go-ahead on September 19, 2002. Current plans are for Phase I of the Millennium line to be in service by November 2006, although the project has yet to be approved by FERC in its revised form. The second phase is currently on hold until 2008 or later owing to increased competition and a changed market in the New York City metropolitan area. If it is completed, Millennium will transport up to 714 MMcf/d of natural gas, providing an environmentally preferred option for generating electricity. According to the Millennium Pipeline consortiums web site, more than 90 percent of the pipelines 425-mile overland route uses existing utility corridors, with about 224 miles of the project replacing and upgrading a 50-year-old pipeline system owned and operated by Columbia Gas Transmission Corp.
Growing U.S. demand for Canadian natural gas has been a dominant factor underlying many of the pipeline expansion projects this decade. The U.S. and Canadian natural gas grids are highly interconnected and Canadian natural gas has become an increasingly important component of the total natural gas supply for the United States. This is especially true for certain U.S. regions such as the Northeast, Midwest, the Pacific Northwest and California, which depend on Canadian natural gas for significant amounts of their supply. Overall, the United States received about 3.6 Tcf of natural gas (gross) from Canada during 2004, up from 3.5 Tcf in 2003. Mexico is a small net importer of natural gas from the United States.
Considerable progress has occurred in recent years to connect Canadian natural gas supplies to U.S. consumers. The Northern Border Pipeline, an extension of the Nova Pipeline, came onstream in late 1999 and connects to Chicago through the upper Midwest. A further extension to Indiana entered service in 2001. The Maritimes and Northeast Pipeline came onstream in January 2000, running from Sable Island to New England, with further extensions into the Boston area to be completed during 2003. The pipeline has a capacity of 400 MMcf/d.
The $2.5 billion Alliance Pipeline, at 1,875 miles, is the longest pipeline ever built in North America, and is designed to carry about 1.3 Bcf/d of gas from western Canada (Fort St. John, British Columbia) to the Chicago area. The pipeline began commercial service on December 1, 2000. The U.S. utility Pacific Gas & Electric imports natural gas from British Columbia via the Alliance pipeline.
Another possibility for future U.S. natural gas supplies lies in northern Canada, which contains around one third of that countrys recoverable gas reserves. The Mackenzie Valley pipeline, for instance, could carry as much as 1.2 Bcf/d of gas from Canadas far north to southern Canada and the United States, possibly beginning in 2008 (assuming satisfactory completion of a regulatory and environmental review; currently, the project appears stalled). However, Canada is consuming increasing volumes of gas itself for such activities as oil sands extraction and processing. Accordingly, Canada may export less natural gas to the United States than is now expected. A competing pipeline would transport natural gas from Alaskas North Slope to the lower-48 states, with possible capacity as high as 4-5 Bcf/d, potentially beginning sometime around 2012.
On October 12, 2001, the U.S. Coast Guard lifted a ban on LNG tankers from Boston harbor. The ban, in effect starting September 26, 2001 (two weeks after the terrorist attacks in New York and Washington, DC), was established in response to security and safety concerns about the ships that bring LNG to the import facility of Distrigas of Massachusetts (a Division of Tractebel, Inc.). The decision enabled the reopening of the Distrigas facility in Everett, Massachusetts, one of five currently active LNG facilities in the United States (plus one in Puerto Rico). The other four active U.S. LNG facilities are located in Lake Charles, Louisiana; Elba Island, Georgia; Cove Point, Maryland, which received its first commercial LNG cargo in 23 years in August 2003; and offshore Louisiana (the Gulf Gateway Energy Bridge deepwater port, operational since March 2005). Cove Point is now the nations largest LNG import facility, and a new 2.5-Bcf storage tank is scheduled to be added in January 2005 by its owner, Dominion. Expansion is also planned for the Lake Charles and Elba Island LNG facilities.
On balance, interest is growing in LNG as a source of natural gas for U.S. electric power generation and also as a source that would provide supply flexibility. EIA expects that net LNG imports to the United States will increase sharply in coming years, growing to 2.5 Tcf in 2010 and 6.4 Tcf in 2025. During 2004, the United States received about 652 Bcf of LNG, mainly from Trinidad and Tobago, Algeria, and Qatar.
Currently, about 55 LNG terminals are on the drawing board to serve North America (mainly the United States). The Sempra Energy Cameron LNG project in Hackenberry, LA, approved in September 2003 by the Federal Energy Regulatory Commission (FERC), marked the first new LNG plant granted approval in the United States in 25 years. Besides the Hackenberry facility, Sempra signed a deal with BP in December 2003 to supply Indonesian LNG to a proposed receiving terminal in Baja California. The gas would then be piped to U.S. West Coast markets. Also, in December 2003, Shell announced plans to build a $700 million LNG receiving terminal, called Gulf Landing, 38 miles off the coast of Louisiana. The project is slated to handle 1 Bcf/d of LNG starting in 2008 or 2009. Other possible LNG projects include: an offshore LNG receiving terminal called Port Pelican, located 40 miles off the Louisiana coast (ChevronTexaco); a $600 million facility near Port Arthur, Texas (ExxonMobil); a terminal in Sabine Pass, LA (Cheniere LNG) approved by FERC in March 2005; and a $450 million terminal in eastern Mississippi (Gulf LNG Energy).
In December 2003, EIA issued a report, "The Global Liquefied Natural Gas Market: Status and Outlook,” in conjunction with a Department of Energy LNG summit. At the summit, then-Energy Secretary Spencer Abraham pledged to make the process of licensing and building LNG receiving terminals easier. In March 2004, an agreement between FERC, the Coast Guard, and the Department of Transportation aims at streamlining the process regarding environmental, safety, and security reviews of proposed LNG projects.
Natural gas wellhead prices reached then-record highs of nearly $10.00 per thousand cubic feet (mcf) in late 2000/early 2001, but fell sharply soon thereafter to around $2.50 per mcf. Cold weather in the U.S. Northeast and Midwest during the winter of 2002/2003 raised prices once again, as gas storage levels hit unusually low levels and cold weather limited pipeline operations. The Henry Hub natural gas price is expected to average about $9.15 per mcf in 2005 and $9.00 per mcf in 2006. In September 2005, the Henry Hub natural gas spot price averaged $12.40 per mcf, as hot weather in the East and Southwest increased natural gas-fired electricity generation for cooling demand, crude oil prices increased, and Hurricane Katrina hit.