Look How Far We've Come, Part 2 - Net Impacts of the TETCO Gas Pipeline Outage

Ten weeks after an explosion crippled a key natural gas takeaway route out of the Marcellus/Utica, the capacity finally has been fully restored. Texas Eastern Transmission two days ago said it’s lifting all restrictions on the affected section of pipe. The outage began on January 21 and partial service resumed eight days later, but TETCO’s Northeast production receipts during the event averaged about 700 MMcf/d lower than usual and the line’s flows to the Gulf Coast were cut by 30-40%. That, along with two severe polar-vortex periods in January that overlapped with the outage, caused a reshuffling of flows across other pipelines in the region. Today, we wrap up this series with a look at the implications of the outage on the Northeast gas market and what to expect now that it’s ended.

Last fall, in our Dog Days Are Over? series, we previewed a potential turning point in the Appalachian gas market, from the supply region being severely constrained for years to being well-connected with the ability to better balance its excess supply with outflows. As we’ve discussed extensively in the RBN blogosphere, takeaway constraints in the Marcellus/Utica producing region have for years been depressing local prices at regional trading hubs like Dominion South and Tennessee Zone 4/Marcellus, trading well below the national benchmark Henry Hub, even during the winter months when Northeast demand peaks. But a number of pipeline expansions came online in the summer and early fall of 2018, and pipeline utilization for flows out of the region seemed to suggest that takeaway capacity had finally caught up, with room to spare, at least for the time being. (We’ll come back to the specifics of that “spare capacity” in a future blog.)

Then, on January 21 (2019), TETCO — an important takeaway route from the Marcellus/Utica — experienced an explosion and subsequent outage, reducing southbound capacity on its “30-inch” line and putting the new “unconstrained” reality to the test. (Note that while the leg is called the “30-inch” line by legacy, the pipe now includes multiple lines in the ground along that path.) The location of the outage in Noble County, OH, shut down flows through the Berne compressor station, severing the connectivity between Northeast supply and downstream Gulf Coast demand, and bifurcating the pipe into two, with its northern zone moving Marcellus/Utica supply to the East Coast market areas (Market Zone 3; orange oval to far right in Figure 1) and, the more southern portions of the system (everything south of the Berne compressor station) left to source supply from Louisiana and Texas — like in the days before the Marcellus/Utica’s growth and TETCO’s reversal. As we noted above, the full outage lasted only a few days, with partial service resuming by January 29, but until yesterday the line’s capacity remained reduced at 1.6 Bcf/d, or 70% of its normal capacity. Keep in mind, the outage overlapped in its early days with two extreme weather events — the coldest days of this winter, in fact — in mid-January and again in late-January/early-February. These events factored heavily into flows and price response in that they helped absorb any excess Marcellus/Utica supply and, beyond that, pulled significant volumes north from the Gulf Coast, not just on TETCO, but on other long-haul pipes.