Will Lack Of Infrastructure Slow Eagle Ford Shale Activity?

Will the Lack Of Pipelines In The Eagle Ford Shale Play Cause a Cool Off?

One of the huge advantages that oil and gas companies have in developing prospects in the Eagle Ford shale (sometimes spelled Eagleford)  is that there is an existing infrastructure of pipelines and other assets along the center of the trend, which follows the Stuart City shelf and Sligo Reef trend. Here there are countless Edwards, Wilcox, Olmos and other wells already producing and gathering lines in place. However, that being said the existing pipeline network is inadequate.

The massive amount of oil and gas that will be produced as many more Eagle Ford shale wells come online will cause a backup, with some producers forced to put very productive wells on small chokes to restrict gas flow (and sale).

New Eagle Ford Shale Pipeline Projects In The Works

Oil and Gas Journal reports that Kinder Morgan along with Copano Energy have signed an agreement to build a 24 inch pipeline that will originate in LaSalle County and terminate in Duval county where the gas will enter larger pipelines. The new pipeline will be capable of carrying 350 MMcfd.  That means it can handle gas from somewhere around 70 Eagleford shale wells making 5 MMcfd.

With the number of expected wells to come online in the next few years this pipeline alone, as large as it is, will be over capacity at some point.

Enterprise Products Partners, LLC, has announced that it will provide capacity of over 200 MMcfd. The White Kitchen Lateral project, a 16 inch diameter gas pipeline which stretches over 62 miles through some of the most productive areas of the Eagleford shale is nearing completion. Some segments are already carrying natural gas.

Liquids Processing And Handling Strained

Eagle Ford shale gas is very high in liquid content, mostly condensate. This valuable condensate must be removed from the gas before it is sent down the pipeline. Currently liquids processing facilities (refineries) in South Texas are over capacity and new facilities will have to be built.

Aside from the gas and condensate handling ability of the current and proposed infrastructure there will be some serious issues with the development of the “oil window” or northern oil bearing part of the Eagle Ford shale. Here there are few or no pipelines to carry the produced oil to market. Long, rough gravel roads will have to be trafficked by scores of oil trucks.

All of this oil traffic will be a heavy burden on state and county roads, as it was during the brief Austin Chalk oil boom a few years ago. The difference is that many geologists agree that the Eagle Ford shale will be productive for a number of years, unlike the Austin Chalk which quickly depleted.  A network oil oil and gas pipelines, not to mention new refinery capacity, will have to be built, and quickly to handle all of the production that will soon be coming online.

There are other pipeline projects in the works but they may not be online soon enough to handle all of the capacity from Eagle Ford shale wells. It brings to mind the building of hundreds of wind turbines in West Texas with no power lines to sell the power through.

Producers are aware of this and may delay drilling in some parts of the Eagle Ford shale until the very end of the lease contracts so that pipeline construction can catch up. Because of that fact the majority of drilling will continue to occur along a swath a few miles either side of the new gathering pipelines, in this blogger’s opinion.

Update: There are reports coming in of producers restricting the output of Eagle Ford shale  wells in the oil window by using smaller chokes due to a lack of available oil trucks. Even the larger oil hauling companies have been caught by surprise as the sixth largest oil discovery in U.S. history continues to be developed.

In a recent report to investors in May of 2011, EOG Resources chairman Mark Papa noted that almost all Eagle Ford shale liquids production would be moved by truck until mid 2012.

Nolan,