...the bid documents for that project later this year.”
The promise of Canadian oilsands crude has sustained the expansion of Shell’s Port Arthur, Texas, refinery. Under contract to Motiva Enterprises LLC, Bechtel is teaming with Pasadena, Calif.-based Jacobs Engineering Group to increase the facility’s capacity to more than 600,000 bpd, more than twice its current output. “The project hasn’t slowed down, but we have worked with Motiva to balance activity with cash flow,” Jackson says. “It will stay this way for the remainder of this year, but we hope to ramp up in 2010 as long as crude prices remain stable.”
Shaken but Steady
Natural gas projects in the continental U.S. have experienced a similarly bumpy road, with wellhead prices peaking in step with oil during the summer of 2008, then dropping by nearly half by the end of the year according to the U.S. Energy Information Administration (EIA.) However, these projects could recover more quickly thanks to a weakened U.S. dollar and easy access to existing active shale plays in Texas and Louisiana, which represent some of the largest sources of natural gas in the U.S.
Collier expects more development in these areas, with activity to soon pick up in the massive Marcellus shale play in the northeastern Appalachian Mountains.
“The demand side will be important, as overall industrial gas demand has waned with the economy, and reduced cash flow from low commodity prices have caused exploration and production companies to cut back on drilling,” he says. “When it does pick up, it will be in the most economical places. But I think there’ll be an uptick of drilling by the second quarter of 2010.”
That activity should prove beneficial to builders of pipelines, which enjoyed a robust year in 2008. Major interstate projects such as the 750-mile Overland Pass liquid natural gas line from Wyoming to Kansas and the 720-mile REX pipeline system from northeastern Colorado to eastern Missouri added 43.1 billion cu ft per day of new capacity, according to EIA. The agency also projects another potential 35.4 bcf of capacity to be added this year, which would make 2009 the second largest year for natural gas pipeline construction since 2000.
The industry also is tracking the progress of a new pipeline to transport natural gas from Alaska’s North Slope. TransCanada’s proposed $26-billion, 1,715-mile line to Calgary, which could be operational by 2018, has earned the endorsement of the state of Alaska. However, BP and ConocoPhilllips insist they will move forward with developing their rival $32-billion, 1,500-mile Denali gas pipeline.
For contractors involved with offshore oil and gas exploration and drilling projects, current market prices and the marginal cost of developing fields in U.S. waters means that the most promising opportunities in the immediate future lie overseas.
“North America lags behind the Middle East and Caspian Sea region in terms of upcoming activity,” says John Fees, CEO of McDermott International Inc., Houston, which currently has major projects in the United Arab Emirates and Azerbaijan.
Long-term prospects in the Gulf of Mexico received a boost in early September when BP announced the discovery of a potentially large oil field 250 miles southeast of Houston. The well, known as Tiber, was drilled to a total...
