Los Angeles (Platts)--13Oct2009/529 pm EDT/2129 GMT

The US gas pipeline industry continues to build new capacity, particularly in the West, in anticipation of a gas market rebound next year, several executives said Tuesday at the LDC Forum near Los Angeles.

"If production can turn down so quickly in one year, we don't see any reason why it can't turn back just as quickly," said Todd Kremer, business development director for Kern River Gas Transmission. "We are seeing a return of NYMEX prices with the current steep contango. If those are still here next summer or winter, producers will start drilling again."

Even if production does not fully return to pre-2009 levels, there could still be enough supply to exceed takeaway capacity, Kremer said.

Craig Coombs, business development director for El Paso Western Pipelines, agreed with Kremer's assessment. "Going forward, we see the rig count bouncing back. We expect to see a price correction next year," he said.

Dean Ferguson, TransCanada's vice president of US Pipelines-West, predicted that once climate-change legislation passes Congress, it will prompt more power generators to switch to gas, causing demand and prices to rise.

As a result of those bullish outlooks, pipeline companies have continued with their new and expansion projects in 2009 and believe the new capacity will be ready when production returns. "It's a testament to the investments made into the pipeline system over the last few years," Ferguson said.

TransCanada is preparing a 50-mile expansion to connect the Montney Shale in British Columbia to its existing system, which the company expects to place in service next year. TransCanada also is moving ahead with an expansion to the Horn River shale planned for service in 2011, Ferguson said.

The news isn't all rosy, however, as some pipeline projects have been affected by the economic slowdown. El Paso is still considering reducing the capacity of its ambitious Ruby pipeline--which would stretch 680 miles from Opal, Wyoming, to Malin, Oregon--to 1.25 Bcf/d from 1.5 Bcf/d because of market considerations, Coombs said.

"We have the certificate for 1.5 Bcf/d from FERC, so we can increase it later," Coombs added. "The decrease, if it occurs, will probably last two years. We will decide in the next two months or so."

El Paso expects construction on Ruby to begin in July 2010 with an anticipated in-service date of March 2011.

--Joshua Starnes, joshua_starnes@platts.com