Billions Needed To Meet Long-Term Natural Gas Infrastructure Supply, Demands

By Rita Tubb, Managing Editor | January 2010 Vol. 65 No. 1
Billion $ in Natural Gas Pipeline, Storage, and Gathering Infrastructure, 2009-2030

Infrastructure costs
The report’s Base Case and High Gas Growth Case projects that $130 to $160 billion will be needed for new pipeline infrastructure development from 2009 to 2030. Even in the Low Electric Growth Case, which has much lower natural gas consumption, $108 billion is required in pipeline investments mainly to accommodate major shifts in the location of natural gas supply. Average annual expenditures for pipeline and compression infrastructure average approximately $5.9, $7.5, and $5.1 billion per year for the Base Case, High Gas Growth Case, and Low Electric Growth Case, respectively. In all three cases, projected expenditures exceed the $4.1 billion per year average from 1999 to 2008 (Figure 5, Figure 6, and Figure 7). Expenditures are expected to be greater even though the amount of incremental pipeline mileage needed is lower, due to the cost of the Arctic projects and general construction cost escalation.

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Gas pipeline cost per inch-mile
The cost of building natural gas pipeline(1) infrastructure varied between $30,000 and $100,000 per inch-mile(2) from 1993 to 2007 (Figure 8), according to the study. Through 2004, increases in pipeline construction costs were generally modest. After 2004, however, costs began to escalate dramatically, nearly doubling previous levels by 2006. This was due, in part, to high world commodity prices, especially the price of steel. Costs have declined recently and the several year cost run-up is expected to only be temporary. Since all three cases have similar GDP assumptions, input costs are assumed to be the same in all cases. Construction costs are projected to decline through 2010. After 2010, costs resume a general upward pattern consistent with the pre-2004 cost trends, which are slightly less than the assumed future inflation rate of 2.5 percent per year.