New Pipelines

With crude prices below $30/Bbl and the price spread between U.S. domestic crude benchmark West Texas Intermediate (WTI) and international equivalent Brent trading in a very narrow range – the economics of moving Crude-by-Rail (CBR) rarely make sense any more.  Rail shipments are down across all regions and railroads are reporting sharply lower revenues from CBR shipments.  Today we start a new series revisiting the regions where CBR traffic boomed a couple of years back and contemplating its future value to shippers and refiners.

Producers in the Marcellus and Utica shale plays could be moving a lot more natural gas into New England, if only there was enough pipeline capacity to get it there. An increasingly gas-hungry neighbor to the nation’s most prolific production area, New England has added precious little capacity to transport gas, and the fates of game-changing pipeline projects that have been proposed hang in the balance. The region’s unique gas-delivery challenges, their market impacts and possible solutions are the subject of RBN Energy’s newly released Drill Down report, “Please Come To Boston—New England’s Ongoing Gas-Supply Dilemma”. Today, we provide a preview, and highlight some of the report’s findings.

The Dominion South Point strip price for the balance of 2015 (March-December) has been settling consistently under $1.90/MMBtu, while Transco Zone 6 in New York is averaging around $2.80/MMBtu in this week’s forwards market. Meanwhile, Northeast and US gas production remain near record levels. The breakeven price environment and looming oversupply leaves producers and the industry vulnerable to the downside. Where and when will prices bottom out? What, if anything, would trigger a rebound?  Today Part 4 of our Forward Curve Series, focuses on fundamental factors driving Northeast forward curves over the next few years.