(Platts Gas Daily August 17, 2012) Rocky Mountain gas producers need to start finding additional markets on the Gulf Coast or West Coast because gas flowing east on the Rockies Express Pipeline is being displaced by new volumes from the Marcellus Shale, a veteran gas analyst said Thursday in Denver. “The competition is coming from the Marcellus,” RBN Energy President Rusty Braziel told the Colorado Oil & Gas Association’s Energy Epicenter conference. “The Marcellus is growing like crazy and it’s going to continue to be crazy for the next few years.”
As a result, “REX won’t be needed,” he said. “That market will dry up. If the cubic feet won’t flow east, they had better be flowing west.” Operator Kinder Morgan is currently in the process of shedding its 50% share of REX as part of a deal allowing approval of the company’s purchase of El Paso’s pipelines. Sempra Energy and ConocoPhillips each own 25% of the 1,679-mile pipe.
Designed before producers began to produce large volumes of shale gas in the Marcellus, REX sends gas from Colorado to Ohio. On August 10, Sempra wrote down the value of its 25% stake in REX, citing weaker basis prices to the East Coast because of the Marcellus play. Sempra took a $179 million non-cash charge against its investment in REX, but noted that the pipeline is still fully contracted through 2019.
