Thursday, June 18, 2009

More on Enbridge's LaCrosse Pipeline

I recently read an interesting interview in the Calgary Herald with Steve Letwin, Managing Director of Enbridge Energy Co. Inc. discussing the company's proposed LaCrosse pipeline in the Haynesville Shale area. The article is pretty short, but it gives good insight on Enbridge's strategy and some of the obstacles faced by the project (and any pipeline project in the region).

One of the biggest concerns is the unknown potential of the Haynesville Shale and the high shale gas depletion rates relative to conventional production. Another issue specific to Enbridge, which is better known as a long haul pipeline company, is the decision to build a short route pipeline in an already crowded field.

Enbridge has an interesting strategy to cope with the issues. First, the decision to build a smaller, shorter pipeline somewhat lessens the risk of the depletion rate and the crowded field. Relative to other Enbridge projects, the shorter pipe requires a lower investment and therefore has lower risk to the company. Additionally, since the pipeline will interconnect at Carthage, which handles gas from East Texas and the Barnett Shale, the Haynesville concentration issue is lessened. Interestingly, the company decided to aim the pipeline towards Florida, which has shown strong demand, rather than move the gas to the north, where Enbridge feels it might face future competition from the Marcellus Shale.

No comments: