September 29, 2017 - Natural Gas Intelligence (NGI)
Limited Pipeline Capacity to Gulf Coast Means More NatGas Basis For E&Ps, Says Braziel
By: Jeremiah Shelor
With so much new supply hitting the market over the next few years, and with incremental demand from the Gulf Coast, natural gas producers haven’t seen the last of widening basis differentials, according to RBN Energy LLC's Rusty Braziel.
The new pipeline capacity planned for the Marcellus and Utica shales -- headlined by the 3.25 Bcf/d Rover Pipeline -- should soon relieve takeaway constraints and allow Northeast exploration and production (E&P) companies to stretch their legs, Braziel said during a recent web presentation.
Based on current forward curves, RBN is projecting combined Marcellus/Utica production to grow from around 24 Bcf/d currently to nearly 40 Bcf/d by the end of 2022.
"That's a 16 Bcf/d increase, almost half of which is probably going to happen between now and 2019, so Rover shouldn't have any problem at all filling 3.25 Bcf/d,” nor should a "gaggle of projects to get gas out of the Northeast. But "the market may have a bit of a problem" once all this new supply comes online, "because the Marcellus and Utica region is not the only area that's experiencing supply growth."
There’s the resurgence in the gas-focused Haynesville Shale, where RBN is counting another 3 Bcf/d of supply coming online through 2022 based on forward curve pricing.
Associated gas from oil-directed drilling also is growing, particularly in the Permian Basin and in Oklahoma’s stacked reservoirs, notably the SCOOP (South Central Oklahoma Oil Province) and STACK (Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties).
In the SCOOP/STACK, RBN is modeling about 3 Bcf/d of associated gas supply growth through 2022.
In the Permian, a lack of historical data for greenfield development, for example, Apache Corp.'s Alpine High, presents upside to associated gas growth and makes accurate modeling difficult, Braziel said. RBN estimated the Permian, spread across West Texas and southeastern New Mexico, could generate 3 Bcf/d of associated gas growth just from the Delaware sub-basin by 2022, with the Midland chipping in another 1 Bcf/d.
Associated gas is generally understood as a source of production that’s unresponsive to natural gas economics, but Braziel made it crystal clear what that means in terms of an E&P’s bottom line….