Appalachia natural gas producers hoping to get a big boost in pipeline takeaway capacity later this year were dealt some bad news recently. On May 4, Equitrans Midstream officially pushed back the in-service date for the already-delayed Mountain Valley Pipeline. The 2-Bcf/d, greenfield project is the last of the major planned expansions that would add substantial capacity from the prolific Appalachia gas-producing region and help stave off severe seasonal pipeline constraints, at least in the near- to midterm. Previous guidance had it coming online late this year, but Equitrans said it is now targeting start-up in the summer of 2022, pending water and wetland crossing permit reviews. The news is far from surprising considering the numerous regulatory and legal challenges midstream projects, including MVP, have previously faced in the Northeast over the past decade or so. But the resulting uncertainty leaves Northeast producers in a tight spot. In today’s blog, we will consider the implications of the MVP delay for Appalachia’s outflows.
Even prior to this latest MVP setback, we have been sounding the alarm about worsening pipeline takeaway constraints for gas supply leaving Appalachia in our Headed for Heartbreak blog series. Appalachian producers have long battled with the precarious balance between Marcellus/Utica gas supply and the pipeline capacity to get it to market and the resulting pressure on prices. For a while, things were looking better. Capacity additions in the 2018-19 timeframe had outpaced production growth, easing constraints. But as we’ve been hammering on in the ‘Heartbreak’ blogs, capacity tightened up again in 2020, in part due to an outage on Texas Eastern Transmission (TETCO), but also due to production growth. And, what’s more, it’s likely to remain tight and become further constrained over the next several years, just seasonally at first and eventually also year-round.
That was our assessment even with MVP expected to come online later this year. However, 2 Bcf/d is a significant chunk of incremental capacity, and a 2021 start-up would have gone a long way toward reducing the seasonal constraints in the midterm and keeping Appalachian gas supply prices from collapsing in the process, potentially as early as this fall or by next spring. So, understandably, all eyes have been on the prospects and timing for MVP crossing the finish line. The recently announced delay means that pressure will continue to build through the fall of 2021 and now, into the spring 2022 shoulder season as well.
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