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

One of the major target markets for Appalachian natural gas is the U.S. Southeast. More than 32 GW of gas-fired power generation units are planned to be added in the South-Atlantic states by 2020 and LNG exports from the Southeast are increasing. Of the 15.5 Bcf/d of takeaway capacity planned for Appalachia, close to 5 Bcf/d is targeting this growing demand. Despite the need, these pipeline projects designed to increase southbound flows from the Marcellus Shale have faced regulatory delays and setbacks. Today, we provide an update on capacity additions moving gas south along the Atlantic Coast.

This is Part 3 of our "In a Northeast Minute" blog series updating our analysis of pipeline expansion projects compared with gas production growth from Appalachia. Until the past 18 months or so, Northeast production growth was far outpacing regional demand growth as well as takeaway capacity additions to move gas out of the Northeast. That dynamic meant that more of the production growth had to stay put, and eventually, once local needs were met, that production could grow only as new pipe capacity was added. The result was an out-of-whack supply/demand balance that depressed gas prices in the supply areas as well as in the destination markets. Now, more than a dozen expansion projects have come online, and as we alluded to in our Too Much Pipe On Our Hands? blog series, if all the proposed takeaway capacity were to materialize as planned, those constraints would begin to ease by 2017-18 and the infrastructure could become overbuilt.

But a lot has changed in recent months. On the one hand, Marcellus/Utica production growth has slowed dramatically (see Unchain My Heart). On the other hand, we showed in Part 1 of this series, relatively mild weather this year has meant that, despite flattening production, more gas supply than ever has been flowing out of the region to seek other markets. Moreover, rig counts are rising, indicating production volumes are likely to soon follow. And finally, several of the proposed projects are being challenged by lengthy environmental review and approval processes, public opposition and insufficient commitments, in many cases resulting in delays, deferments or even cancellations.

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