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ENGlobal Corp. (ENG) Well-Positioned to Capitalize on Immense Natural Gas Pipeline Infrastructure Demand
According to a comprehensive report prepared by Virginia-based management, technology and policy consulting firm ICF International and issued late last year by the INGAA (Interstate Natural Gas Association of America), which facilitates the construction and reliably safe operation of the North American natural gas pipeline system, some $641 billion will need to be spent by 2035 on midstream infrastructure like pipelines and pumps to keep up with burgeoning gas, crude oil, and natural gas liquids production from U.S. fields. That’s about $30 billion a year, or roughly three times the average annual investment seen in the preceding decade, and the next six years or so look to be the heaviest period of activity.
With around half the yearly $30 billion in expenditures going straight into accommodating new gas supplies and hooking up new shale plays to existing infrastructure, or facilities that are currently still on the drawing board, and around 35k miles of new transmission pipes and some 303k miles of gas gathering lines needing to be built, a huge opportunity exists for EPCM (engineering, procurement, and construction management) companies like ENGlobal Corp. (NASDAQ: ENG). With a wealth of energy-related automation integration services at the ready and a successful track record of engineering and constructing a broad array of different hydrocarbon transportation and distribution systems, from pipelines and pump/flow stations, to high-pressure gas and water injection facilities, as well as compressor and metering stations, ENGlobal is one of a handful of U.S. companies with the established market presence, full-spectrum capability and domestic manufacturing capacity needed to fill this vital role. Especially since ENGlobal has considerable experience handling the often difficult logistics and constraints imposed on project executions in remote locations and harsh climates.
Demand for new natural gas pipeline infrastructure linked to ongoing shale booms can clearly be seen with projects like the Northeast Energy Direct Project from energy infrastructure giant Kinder Morgan (NYSE:KMI), which is designed to bring natural gas from the prolific Marcellus Shale to New England in order to keep up with growing regional demand from consumers and industry, and whose eventual capacity could be scaled up to 1.2 billion, or ultimately 2.2 billion cubic feet per day (initial capacity of 500k dekatherms/day, or about 0.5 Bcf/d). Another good example is the $5 billion, 550-mile Atlantic Coast Pipeline by Duke Energy (NYSE:DUK) and Piedmont (NYSE:PNY), who have tapped Dominion (NYSE:D) to build and operate the massive 1.5 Bcf/d interstate pipeline, which will carry much needed gas from West Virginia through Virginia and into eastern North Carolina, in order to meet the rapidly mounting regional demand.
ENGlobal actually just announced a 5-year extension agreement with major utility supplier of electric power and natural gas service, Xcel Energy (NYSE:XEL), via a new professional services agreement that will see ENG doing a variety of construction, design, engineering, management and procurement work in support of Xcel’s sprawling natural gas pipeline and facility projects. ENGlobal has already been instrumental in helping Xcel advance their West Main Natural Gas Replacement Project in Colorado, where some 77 miles of a 90-mile high pressure transmission pipeline are being worked on, with Larimer and Weld counties completed between 2012 and 2014, and the remainder of the work in Boulder County slated for between 2015 and 2016. ENGlobal also helped Xcel on their Colorado Public Utilities Commission-approved CACJ (Clean Air-Clean Jobs Act) Plan last year, which involved, among other things, 34 miles of new, 24-inch steel, high-pressure natural gas transmission pipeline, which was installed between a new Fort Lupton metering facility and the Cherokee Generating Station’s new gas plant.
Another major driver behind all this gas pipeline demand has been the slew of new initiatives announced last year by Secretary of Energy, Ernest Moniz, that are part of the DOE’s sweeping Administration Strategy to Reduce Methane Emissions, which follows up on the White House and DOE Capstone Methane Stakeholder Roundtable. The primary goal is to modernize national natural gas transmission and distribution systems, while reducing methane emissions. The directive by Secretary Moniz to the main oversight agency for all interstate pipelines, the FERC (Federal Energy Regulatory Commission), recommending that the agency look at providing new ways to achieve greater cost certainty for developers when it comes to recovering outlays on new investments in modernized natural gas transmission infrastructure, has already created substantial buzz within the EPCM industry. One of the chief initiatives, The Natural Gas Infrastructure R&D Program, which is being launched this year by the Office of Fossil Energy via the National Energy Technology Laboratory, will be focused on enhancing midstream deliverability efficiency and should provide solid tailwinds for ENGlobal and other infrastructure development firms.
Learn more by visiting www.ENGlobal.com
