CCGT

The development of Appalachia’s Marcellus and Utica shales has flipped regional natural gas prices in the U.S. Northeast from their long-time premiums to Henry Hub, to trading at a significant discount and, in the process, reversed inbound gas flows, including from Eastern Canada. But there is an exception: from an entry point at the northern edge of New York, the Iroquois Gas Transmission pipeline is still importing Canadian gas supply nearly year-round to help meet local demand, despite its proximity to Marcellus/Utica production via other Northeast pipelines. This has kept prices along the Iroquois pipeline system at a premium to the other points in the region. And with the new, 1,100-MW Cricket Valley Energy Center power plant due online this spring, Iroquois prices are likely to strengthen. Today, we examine the dynamics driving Iroquois prices and gas flows.

The US Environmental Protection Agency (EPA) June 2014 Clean Power Plan (CPP) proposal to reduce greenhouse gas emissions from the power sector 30% from 2005 levels by 2030 would result in a sharp increase in natural gas consumption and potentially major changes in infrastructure to deliver more gas to power plants. The proposal would radically increase the pace at which coal-fired power plants are replaced by gas-fired generation. Today, we consider the proposal and its likely impact on gas demand and the industry.

Earlier this week (see Spring, Spring, Spring is in the Air) we looked at the US natural gas supply demand picture. Our analysis focused on the 25 percent run up in NYMEX natural gas futures prices to $4/MMBtu this year (they have since slipped back to close yesterday at $3.90/MMBtu). Prices rose because high winter demand helped demolish a huge gas storage surplus that hung over the market and depressed prices since last spring. The market should not forget however that for a time last year – with prices below $2/MMBtu and Lower 48 dry gas production through the roof - there was talk of hitting the “storage wall”. A sharp increase in power burn soaked up 6 Bcf/d of natural gas last summer and helped the market out of that scrape.

Nowadays everyone is pretty sure that there is plenty of natural gas supply to go around. Storage is bursting at the seams; production is close to record levels. Midstream infrastructure companies are busy developing new pipelines and additions to deliver shale gas to existing markets. Market analysts agree that new natural gas demand over the next decade will largely come from increased gas fired power generation. Is the current natural gas infrastructure configured to deliver gas to this new generation capacity? Today we report on emerging power industry planning concerns.

Today the Energy Information Administration (EIA) publishes weekly US natural gas storage numbers for the week ending July 6, 2012. Last week EIA reported 39 Bcf injections making the total storage 3,102 Bcf. The natural gas stockpile is now 602 Bcf higher than this time last year but the rate of storage injection has slowed as a result of increased demand for natural gas burn by power generators. In today’s blog we look at the supply demand picture to see what is driving higher natural gas burn by power generators and the implications for storage.