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Billions Needed To Meet Long-Term Natural Gas Infrastructure Supply, Demands
The study finds the cost of pipeline construction is divided roughly equally between materials, labor and miscellaneous. In 2007, materials costs accounted for over 35 percent of total costs, but have since declined. The miscellaneous category includes engineering, surveying, administration, and environmental costs. Costs for right-of-way account for 8 to 9 percent of total construction costs. This component has recently increased at a slightly faster rate than the other components. It is projected that the labor and right-of-way components will grow slightly faster than the other components, as skilled labor remains a premium commodity and pipeline permitting and siting continue to increase in complexity. The cost of materials is projected to increase at a rate slightly less than inflation and account for about 25 percent of total pipeline construction costs by 2030.
In all cases, cumulative transmission pipeline expenditures are similar through 2012, but they diverge thereafter. Considering the time required for pipeline planning, permitting and construction, it will take a few years before policy shifts such as those assumed in the High Gas Growth Case and the Low Electric Growth Case affect natural gas infrastructure investment. Pre-2012 pipeline infrastructure projects are already in advanced planning or already under construction, so they are not likely to be affected much by policy changes.
In the report, both the Base Case and the High Gas Growth Case assume that the U.S. and Canada are out of the current recession by the beginning of 2010. A shorter recession would have little impact on the projected amounts of midstream infrastructure developed. If economic growth resumes a few months earlier, the results would be only slightly different. All other factors being held equal, natural gas consumption and prices would rise more quickly due to the increased economic activity. Still, the change would most likely be unnoticeable. Current pipeline and storage projects most likely would not be impacted much, and future infrastructure projects beyond 2012 may be put in place six months to a year earlier.