The latest Energy Information Administration (EIA) Drilling Productivity Report projects natural gas production in the Marcellus and Utica up 170 MMcf/d in April, and forecasts growth of another 150 MMcf/d in May and June to average about 3.8 Bcf/d higher in Q2 than in the same period last year. While there is talk of deferred well completions and shut-ins, it has yet to translate to a slowdown in production volumes in the Northeast region. Our analysis suggests that barring record-high demand, the region will struggle to balance growing supplies this summer with potentially dramatic consequences for prices Today we conclude our analysis of the Northeast gas supply/demand balance.
In Part 1 of this series we showed how Northeast production growth thus far has largely been accommodated by pushing out traditional supply flows into the region. That cushion has now been used up and will not be available this summer. As a result, incremental production growth this year needs to find about 3.5 Bcf/d of additional demand in order to prevent widespread supply congestion and the prospect of a price meltdown. In Part 2, we assessed the ability for regional storage and consumption to absorb the incremental supply. On the storage front, we found that even record injections and filling storage to capacity would soak up no more than 0.5 Bcf/d of incremental demand. On the consumption side, power burn shows the most promise, given gas-fired electric generation capacity additions, coal plant retirements and competitively low natural gas prices. But we calculated that even a quite optimistic demand growth scenario would bring only about 1.2 Bcf/d of incremental demand, again not enough to offset the 3.5 Bcf/d of additional supply. If both storage and power burn achieved these lofty volumes, combined they would offset at most 1.7 Bcf/d of production. So it’s clear that the regional balance this summer depends on outflows and new demand sources outside the region. That brings us to today’s discussion of the third balancing item: outflows. We look first at additional takeaway capacity added since last summer, and then wrap up with a discussion of the net effect of storage, power and outflows, including high and low demand scenarios.
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Four significant pipeline projects have come online since last summer, for a combined 2.3 Bcf/d of takeaway capacity from the Marcellus and Utica producing regions – mostly increasing flows to the south (pink arrows in Figure 2) with one project north into Canada (blue arrow). Spectra’s Texas Eastern Transmission (TETCO) TEAM South Expansion came online two months early in September 2014, adding 0.3 Bcf/d capacity to flow south to the Gulf Coast. The expansion filled to capacity almost immediately. NiSource’s Columbia Gas Transmission (TCO) West Side Expansion added 0.54 Bcf/d, heading south to the Gulf Coast in late October 2014. Kinder Morgan’s Tennessee Gas Pipeline Rose Lake Expansion added 0.23 Bcf/d in November 2014, flowing northbound from northern Pennsylvania into Canada. And, finally, TransCanada’s ANR pipeline added 1.25 Bcf/d in December 2014 to flow south to the Gulf Coast from western Ohio. There are about a half-dozen more takeaway projects due online later this year. However, these are targeting in-service for fourth quarter 2015, and are unlikely to factor into the summer 2015 balance.
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