Friday, December 11, 2009

LaCrosse Pipeline Open Season Unsuccessful

Enbridge, Inc., developer of the proposed LaCrosse Pipeline, was unsuccessful in its open season for the proposed project that would deliver gas from the Haynesville Shale to southeast Louisiana to interconnect with other eastbound pipelines.  This news came out a couple of weeks ago, but I'm just getting to it. 

The failure of the open season is not the death of the project, and Enbridge stated that it intends to bring LaCrosse to fruition.  The open season is a delicate dance between the pipeline developer and potential customers as both test the waters.  The bottom line is that without advance commitments for the project, investors and financial institutions will not fund the heavy price tag for the construction of the pipeline.  But Enbridge can take the information it learned from the process and negotiate individual deals with customers.  It just won't be as easy as the open season.

While it is a little surprising to hear that the open season failed, it is not completely unexpected.  With the recent concerns of natural gas oversupply and lukewarm demand, there are some questions about how much new supply the market will need.  New pipelines are already underway, and if they pick up the available slack, there is no need for more.  But if the Haynesville Play is to develop to its full potential it will need more takeaway capacity, otherwise long-term production from the Haynesville Shale might be constrained. 

I wonder in the back of my mind if some folks are looking at the Marcellus Shale and its proximity to the big Northeastern consuming region and holding back on some investment in the Haynesville Shale.  There are lots of multi-billion dollar investment decisions being made these days, and it will be interesting to see where the money falls.


Anonymous said...

Where did you see that the open season had failed to produce sufficient interest? I missed that bit of news. Thanks!

Robert Hutchinson said...

Sorry, I forgot to post the link to the Reuters article. It's there now.
Here too: