Until a few years ago, a good bit of the natural gas produced along the Gulf Coast was piped long-distance to warm homes and businesses in the Northeast and the Midwest. Now, though, cheap-to-produce Marcellus and Utica shale gas has come to dominate gas heating and power markets from Boston to Cleveland, and Northeast-sourced gas is starting to move into Louisiana and Texas, competing head-to-head with Gulf Coast production. With Marcellus/Utica gas production in ascendance, what will be the fate of all the gas still being produced along the U.S. Gulf Coast? That’s the subject of RBN’s latest Drill Down Report, highlighted in today’s blog, which describes the battle lines being drawn and the important roles LNG exports and Mexican demand will play in keeping U.S. gas markets in balance.
A quarter-century back, no one would have guessed that in 2016 Americans would be deciding whether to elect a brash New York City developer/reality-show star or a former First Lady as their next president. Similarly, if you’d told a Louisiana or East Texas utility executive in 1991 that in the not-to-distant future he might be burning Pennsylvania-sourced natural gas to run his power plants he might have suggested bed rest and counseling. But here we are. As we say in RBN’s new Drill Down Report (which is available to Backstage Pass subscribers, or for individual purchase), the Shale Revolution continues to have a transformational effect on the U.S. energy sector –– and on our neighbors and the world, for that matter. Texas still produces more natural gas than any other state (20.4 Bcf/d of “marketed production” in April 2016, according to the Energy Information Administration, or EIA), and Louisiana produced an average of 5.2 Bcf/d the same month (25.6 Bcf/d combined). But the core Marcellus/Utica region produces almost as much: 22.0 Bcf/d in April, including 14.3 Bcf/d in Pennsylvania, 4.0 Bcf/d in Ohio, and 3.7 Bcf/d in West Virginia, and it seems likely that, given the Marcellus/Utica’s favorable production economics (which are detailed in the report), these three Northeast states will soon produce more gas than their Gulf Coast rivals.
The stunning rise in Northeast gas production has ramped up the battle for market share. Texas and Louisiana producers already have lost most of their traditional Northeast markets to the Marcellus/Utica upstarts. Much of the Midwest and parts of the Southeast are not far behind ––states like Virginia, North and South Carolina, and Tennessee now receive increasing volumes of Northeast gas thanks to pipeline reversal projects that allow gas to move south on big-diameter pipelines that for decades moved Texas and Louisiana (and Gulf of Mexico) gas north. With faraway domestic markets for Gulf Coast gas being lost to Marcellus/Utica producers, Texas and Louisiana producers increasingly are serving more regional and local needs –– and getting geared up to fight for their pieces of those two new and fast-growing demand centers: 1) new liquefaction/LNG export terminals along the Gulf Coast and 2) Mexico, whose imports of U.S. gas (the vast majority of it crossing the Rio Grande from Texas) have more than quadrupled in the past six years (to more than 3.4 Bcf/d as of April) and are slated to rise past 5 to 6 Bcf/d by the early 2020s.
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