Room at the Top, Part 3 - Northeast Gas Takeaway Capacity vs. Production in 2019

The Northeast gas market has come a long way since 2013, when it first began net exporting gas supply to the rest of the U.S. The past several years were marked by dozens of pipeline expansions to relieve takeaway constraints and to balance oversupply conditions in the region; as a result, takeaway capacity is finally outpacing production growth. How much spare capacity is there now, and how long will it be before production growth hits the capacity wall again? Today, we continue our series on Northeast gas takeaway capacity vs. production, this time examining the utilization of pipes in the Northeast-to-Gulf Coast corridor.

In Part 1 of this series, we started with an overview of where the Northeast natural gas market stands heading into the 2019 summer season. After years of languishing under the pressure of persistent takeaway constraints and oversupply conditions, pipeline capacity out of the region has finally caught up to and is outpacing production growth — the culmination of many projects to reverse traditionally inbound flows to the region. As a result, prices at the Dominion South pricing hub — representative of Appalachian supply — have strengthened relative to the national benchmark Henry Hub. This marks a new phase in the big reversal of gas flows out of the Northeast, which has gone from being almost strictly a gas-consuming region to being nearly gas-supply sufficient and, eventually, also a net supplier of gas to surrounding regions in the U.S. and Canada. The question now becomes, how long before production again outgrows takeaway capacity and constraint-driven prices return? To answer that, in Part 2, we began an assessment of the capacity vs. flows (i.e. utilization rates) on the various transportation outlets out of the Northeast, taking a pipe-by-pipe look at just how much spare capacity there is currently and where. We started with the pipes along the Northeast-to-Midwest corridor — comprising Enbridge/DTE Energy’s NEXUS Gas Transmission line, Energy Transfer’s Rover Pipeline, a portion of Tallgrass Energy’s Rockies Express Pipeline (REX) and the westerly leg of Enbridge’s Texas Eastern Transmission (a.k.a., TETCO “24-inch”) — and the Northeast-to-Canada corridor, with National Fuel’s Empire Pipeline and Kinder Morgan’s Tennessee Gas Pipeline (TGP).

Next, we turn to the pipelines that move Marcellus/Utica gas to the Gulf Coast via the Ohio-to-Gulf and Southeast/Atlantic corridors (see Part 1 for the flow corridor map). These routes include the four major long-haul pipes that once moved most of the Northeast’s gas supplies north from the Gulf Coast producing regions — they’re known as the “T pipes” because their names happen to start with the letter “T.” They include Williams’s Transco, Kinder’s TGP, Boardwalk Pipeline Partners’ Texas Gas Transmission (TGT) and TETCO’s easterly leg (a.k.a. the “30-inch” line), as well as another legacy pipe: TC Energy’s Columbia Gulf Pipeline. This group also includes deliveries from Energy Transfer’s Rover Pipeline into third-party pipelines that direct some of their gas toward the Gulf Coast. We should note that some of the southbound volumes on a few of these routes also capture Gulf Coast-bound gas supply delivered from Tallgrass’s REX.