For years now, U.S. Northeast natural gas production growth has been paced by the availability of pipeline takeaway capacity out of the Marcellus/Utica shales. Midstream companies have been racing to build the infrastructure to support drilling and rising supply in the region. And, until now, it was safe to assume that as new pipeline projects come online, volumes would grow to fill them in short order. But over the next couple of years, that may flip: takeaway capacity additions could soon outpace supply increases, and producers might not be able to keep up. Today, we provide an update of RBN’s Northeast gas production scenarios.
In this series, we have been revisiting our analysis of Northeast natural gas production compared to takeaway capacity pipeline expansions out of Appalachia. As we noted in Part 1 of this series, a lot has changed since late 2014 when we cataloged the numerous expansions planned to resolve the transportation constraints plaguing Marcellus/Utica producers (see the RBN Drill-Down report “50 Ways to Leave the Marcellus”). At the time, midstream companies were still scrambling to keep up with rising supply and the resulting need for producers to access demand markets outside the Northeast. Since then, more than a dozen pipeline projects have come online and production has climbed nearly 5 Bcf/d to just under 23 Bcf/d in recent months, from about 18 Bcf/d in late 2014. And the Northeast has flipped from net importing gas from other U.S. regions and Canada in 2014 to sending more than 9.0 Bcf/d on average out of the area in the past two months.
As much capacity has been added and as much production has grown, the Northeast’s transformation from being a gas taker to being a U.S. supplier is not yet complete. There are 20 more infrastructure expansion projects — backed by producers as well as demand-side counterparties — totaling 17.5 Bcf/d, all banking on continued supply growth in Appalachia. The timing of these projects and the ability for producers to respond to the incremental takeaway capacity will drive market pricing dynamics over the next few years. Many of these projects are now butting up against critical-path deadlines for environmental or regulatory approvals required to meet target in-service dates, while others are fighting to remain viable in the face of public opposition and regulatory setbacks. Given that the status of these projects is in constant flux, the first order of business in this blog series was to update our expectations for each takeaway project based on the latest federal filings and company presentations (RBN closely tracks their progress in our Midstream Infrastructure Database Interface (MIDI).