In August, Fortune magazine published an article titled “ExxonMobil: Green Company of the Year” by Christopher Helman (ExxonMobil is an ARC client). The article argued that “The engineering solution to the matter of carbon in the atmosphere [is to] drill for natural gas. Per unit of energy delivered, methane releases 40% to 50% less carbon dioxide than coal and a quarter less than petroleum. Coal fuels half of U.S. power generation. Replacing all of it with methane would cut CO2 emissions by 1 billion tons a year. Could windmills come close to that in reducing greenhouse gases? Not easily. To get the same emissions reduction you would have to replace half of power plant coal with 80,000 giant turbines covering 400,000 acres of ground.”

The article goes on to highlight ExxonMobil’s investments in natural gas: “ExxonMobil is nearing completion of a $30 billion project to develop the world’s biggest natural gas field. Four giant plants, the biggest of their kind, will chill the gas into liquefied natural gas for loading onto thermos-bottle tankers (also the biggest) and shipment to ports around the world. The Qatar megaproject will by next year boost ExxonMobil’s gas production 12% to 9.9 billion cubic feet a day, and vault the company into first place as the world’s biggest natural gas producer not controlled by a government.”

Further, “new projects in such countries as Yemen, Russia and Indonesia are expected to push up volumes of liquefied natural gas 50% in the next two years. At that point LNG will account for 12% of global gas supply. Meanwhile, drillers are using innovative rock-cracking techniques in the tricky shale deposits of Texas, Pennsylvania and elsewhere; in five years they’ve found at least 500 trillion cubic feet of recoverable gas, roughly 20 years of U.S. demand.”

This article caught my eye for two reasons. First, we have written a lot about ‘green’ logistics and I wondered if the U.S. will have enough pipeline and storage capacity to support this increased supply. Second, here at ARC Advisory Group, we extensively research the process industries, including oil and gas, where pipelines and terminals are key parts of the logistics infrastructure (see “The Complexities of Petroleum Supply Chains“). 

Based on this, I sent an email to Donald Santa, the President of the Interstate Natural Gas Association of America (INGAA), a North American natural gas trade organization. I summarized the Fortune article for him and asked him if he thought North America had enough pipeline capacity to support this upcoming surge in supply. He said if I could wait a bit, INGAA was about to publish a detailed report on the subject. That report—“Natural Gas Pipeline and Storage Infrastructure Projections Through 2030”—has now been published.   

Below is an excerpt from the website:

By 2030, the U.S. and Canada will need approximately 29,000 to 62,000 miles of additional natural gas pipelines and 370 to 600 billion cubic feet (Bcf) of additional storage capacity, in order to accommodate market requirements. The majority of storage capacity additions are projected to be high deliverability salt cavern storage, which would essentially double current capacity. Insufficient infrastructure development could lead to price volatility, reduced economic growth and diminished delivery of gas supply to consumers who need it most.

Other infrastructure needed by 2030 includes:

• 6.6 to 11.6 million horsepower of new gas transmission pipeline compression
• 15,000 to 26,000 miles of new gathering pipelines
• 3.5 Bcf per day of new LNG import terminal capacity
• 20 to 38 Bcf per day of new natural gas processing capacity

All of this will require an investment “from $133 to $210 billion in infrastructure over the next 20 years (between $6 and $10 billion per year).”  The power sector will account for about three-fourths of the market’s growth: “The growth rate of natural gas consumption in the electric generation sector is the predominant determinant of the growth rate of the entire natural gas market.” 

If cap-and-trade legislation passes, and depending on what form it takes, manufacturers seeking a greener footprint will likely look for electric utilities that can power their factories with natural gas and other forms of green energy. 

But as this study makes clear, and Kermit the Frog once sang, “It’s not that easy being green.”