In a Northeast Minute...Everything Can Change - Marcellus/Utica Takeaway Projects to the Gulf Coast

Plans for LNG export terminals, petrochemical plants and gas-fired power generation along the Gulf Coast have made it the #1 target market for Marcellus/Utica natural gas producers. At the same time, these demand projects along the coast, from the Southeast, Texas and even farther down in Mexico, are counting on more supply growth from Appalachia. Since 2014, close to 5.0 Bcf/d of southbound pipeline capacity has been added and another 4.0 Bcf/d is due by early 2019. Today, we continue our update of pipeline expansions out of Appalachia, this time with a focus on the Ohio-to-Gulf Coast corridor.

We began this blog series in Part 1 with a look at how natural gas production growth and the resulting oversupply compared with demand has led to record amounts of natural gas leaving the Northeast in search of markets elsewhere. Critical to this phenomenon has been massive investment in infrastructure, primarily to reverse and expand existing pipelines that used to move gas east and north to now flow gas south and west out of the Northeast. In fact, ever since the emergence of the Marcellus and Utica shales in Appalachia, regional production and prices have been dictated by the relative lack of takeaway capacity. But now, after years of being constrained, capacity to move gas out of Appalachia may finally be catching up to Marcellus/Utica production.  The market is approaching a point where supply growth and prices may no longer be suppressed. The timing and extent of that new reality will depend in large part on the next batch of proposed projects designed to open floodgates for Appalachian gas production.

If all goes as planned over the next couple of years, producers could have not only ample takeaway capacity but also unprecedented optionality (for the Northeast) in terms of routes and destination markets. But a variety of factors, including lengthy regulatory processes, public opposition and environmental concerns, present challenges for these proposed expansions, particularly in the more heavily populated parts of the Northeast.   Given the importance of the infrastructure changes to the Northeast market balance, RBN’s Midstream Infrastructure Database Interface (MIDI) closely tracks changes to the scope and timing of these projects, and this blog series summarizes the latest updates.  As we explained in Part 1 of this series, we organize the takeaway projects — the ones that will move gas beyond the constrained Appalachian supply areas — into five transportation corridors branching out from the Marcellus/Utica supply areas: to the East, to Canada, to the Midwest via Ohio, to the Gulf Coast via Ohio and to the Southeast via the Atlantic Coast (see Figure 3 in Part 1 for the schematic). There are currently 19 viable takeaway expansions totaling 15.5 Bcf/d of capacity still in the works slated to begin service during the next few years.