Jan 25, 2017 4 min read

PITTSBURGH – When Alan Armstrong entered the Marcellus-Utica Midstream Conference in the David L. Lawrence Convention Center Wednesday morning, he said he was taken aback by the fewer chairs in the presentation area than when he spoke there three years earlier.

“That concerns me,” said Armstrong, who is chief executive officer of The Williams Cos., one of the premiere pipeline builders for the oil and gas industry.

The conference, in its eighth year, is put on by Houston-based Hart Energy, a publisher of a variety of oil and gas industry trade publications.

Speaking to an audience of about 250 assembled for his keynote address, Armstrong said that despite higher rig counts, increased natural gas production and steadily climbing prices, the oil and gas industry in the region “is out of position today” for what his company sees as building demand for natural gas products around the country.

As head of one of the biggest pipeline builders and operators, Armstrong is in a position to see demand building from industry as well as from changeovers from coal to gas-fired generation plants and demand from overseas for liquefied natural gas.

While Williams has “tremendous exposure and investment” in the Marcellus and Utica, he said, it also operates Transco, the largest and fastest-growing interstate pipeline in the country, stretching from the Philadelphia region south to the Gulf of Mexico. According to Armstrong, it is expected to double its capacity by 2018.

“The demand that is building up on the back of low-priced natural gas may catch us by surprise in areas like this,” he said in reference to the Marcellus-Utica region.

“The demand is there, but what could kill it is the inability to complete the infrastructure to move the gas,” he said. “It’s not just critical to this region, it’s critical to the U.S. that we’re able to get this infrastructure built.”

But Williams also told the group the industry must change the way it communicates the necessity for building pipelines.

“Our focus as an industry is really making sure we’re doing a better job of voicing the importance of natural gas to the U.S. and our ability in the U.S. to keep up with demand for the benefit of jobs, for the benefit of a better environment and for the benefit of consumers,” whom he said often don’t understand what it means to them when infrastructure gets blocked.

“We as an industry have got to bring a voice. We can’t be heavy-handed about that voice. We have to listen to what the concerns are and how we address those. I think that slamming our fist on the table and saying, ‘We’re right and you’re wrong’ is not the right approach for this industry.”

He noted the average price paid for electricity in Pennsylvania declined between 2015 and 2016 because of the proximity to natural gas being produced here. By contrast, he said, power costs in New England are 60 percent higher with the shutdown of coal and nuclear facilities, commensurate with the blockage of pipeline projects that could offset those costs.

Meanwhile, Appalachian Basin producers shifted production from natural gas liquids to dry gas over the past year because of lack of infrastructure to get liquids to market.

The dilemma, he said, runs counter to Williams’ projection that the region will need to produce 65 percent more gas in the next five years in order to meet the growing demand it sees across the board.

“At Williams, we really don’t have much doubt about this demand. What we’re really uncomfortable about is whether this area is going to be able to respond fast enough to the demand growth we have coming.

“This area is the area that is going to make the difference. We’ve got to be looking forward to the demand and we’ve got to be out in front in voicing the positive benefits for both this region and the whole nation.”

On a day that news outlets were reporting on the Trump administration’s efforts to move ahead on the Keystone XL pipeline, Armstrong said he was more confident about infrastructure being built, “but that is not changing the opposition that we have at a local level. We cannot be complacent today about what’s out in front of us.”