Marcellus/Utica natural gas production volumes this past Saturday (November 4) set a record high of more than 23 Bcf/d, according to pipeline flow data. As a result, overall Northeast production flows on the same day also posted a milestone, with volumes approaching a record 25.3 Bcf/d. This is up ~2.7 Bcf/d from where they started the year. These gains have been made possible because of the numerous pipeline projects that have added takeaway capacity from the region, about 2.4 Bcf/d since last winter alone. Moreover, another ~4.3 Bcf/d in new takeaway capacity either was approved for in-service last week or is expected online before March 2018. Even at partial utilization through the winter, that’s a lot of capacity that could flood the market with new supply. Where is all that capacity headed? In today’s blog, we look at recent and upcoming capacity additions that will affect the gas market this winter season.
At this time last winter, Northeast gas production had just recovered from its seasonal dip that happens in the fall “shoulder season” — the time of the year when summer cooling demand is waning and winter heating demand has yet to show up. After an initial bump in January and February 2016 to more than 20 Bcf/d, gas production flows from the region, based on pipeline flow data from our friends at Genscape, pulled back to around 19.7 Bcf/d and hung right around there for much of the year. Then, storage constraints and mild demand, along with maintenance-related pipeline outages, pushed volumes down to 19 Bcf/d in October 2016. By November, however, they had recovered to that February 2016 level just above 20 Bcf/d, and over the winter months, through March 2017, regional production grew by a little more than 500 MMcf/d to about 20.8 Bcf/d. That compares to a 2.0-Bcf/d uptick in production during the winter of 2015-16 and more than 1.0 Bcf/d the year before that in the winter of 2014-15.
That’s because, as we’ve detailed in previous blogs on the topic, Northeast producers have been constrained by a lack of sufficient takeaway capacity. Thus, production growth has been paced by the addition of new capacity. Besides the mild weather, another reason for the tepid growth rate last winter was that not much takeaway capacity was added to enable more production, especially compared to prior years. The primary capacity that was added was the final 800-MMcf/d of Tallgrass Energy’s project to enable westbound flows from Ohio on its Rockies Express Pipeline (REX — see It’s Been a Long Time Comin’), with 450 MMcf/d of that coming online in early December 2016 and the remaining 350 MMcf/d in early January 2017. And while that new capacity filled up in good time, some of that initially was supply that was rerouted from other takeaway pipelines to REX, meaning while REX flows increased, overall Northeast production volumes didn’t increase one-to-one with those flows.