Natural gas pipeline construction companies are organizing themselves to tackle smaller midstream projects rather than long transmission pipelines, according to the president and CEO of the Interstate Natural Gas Association of America.

Don Santa shared what he has heard from pipeline industry contacts at a Washington, D.C., energy policy conference on tight oil hosted by the Center for Strategic and International Studies on April 3.

Asked if oil pipeline construction was cutting into gas pipeline construction, Santa said this did not seem to be the case. "Anecdotally - we haven't taken a look at this analytically - we have not seen that in any way," he said. "There was a tremendous level of pipeline construction activity that occurred between two and four years ago where, because of the amount of activity going on at the same time, it had an impact on the prices of a lot of the inputs, ranging from steel to construction companies, pretty much across the board. I have not seen any evidence that that is affecting natural gas pipeline construction prices."

"The one thing I will say," Santa added, "based on conversations with some of the members of the INGAA Foundation, who are some of those pipeline construction firms, is that with the intense emphasis on midstream infrastructure - and the gathering pipe needed and the smaller diameter pipe scattered about - that if anything what they are doing is focusing a lot more on having their crews being kind of structured to do smaller, shorter spreads that fit more with the notion of building midstream infrastructure rather than building a lot of long-line transmission pipeline."

Most of Santa's presentation focused on how investment "follows the money" in natural gas gathering and processing infrastructure and tight oil development. He noted that the commodity pricing relationship between gas and oil helps drive this investment. Infrastructure construction can lag behind drilling due to several factors, he said, including a layout of widely scattered wells; difficulties in obtaining rights of way; existing facilities designed for smaller volume wells; weather; the time to design, permit and build new facilities; and shortages of labor, housing and equipment. Each situation is unique and affects processing economics.

A February study prepared by Black & Veatch for the INGAA Foundation concluded the midstream infrastructure necessary to bring natural gas, NGL and oil production to market through 2035 will support more than 125,000 jobs per year, add more than $511 billion in total economic output and generate almost $57 billion in government revenue.

Copyright 2012 SNL Financial LC. All Rights Reserved.

(Originally published April 9, 2012, in SNL Energy Gas Utility Week.)