Northeast Gas

Until a few years ago, a good bit of the natural gas produced along the Gulf Coast was piped long-distance to warm homes and businesses in the Northeast and the Midwest. Now, though, cheap-to-produce Marcellus and Utica shale gas has come to dominate gas heating and power markets from Boston to Cleveland, and Northeast-sourced gas is starting to move into Louisiana and Texas, competing head-to-head with Gulf Coast production. With Marcellus/Utica gas production in ascendance, what will be the fate of all the gas still being produced along the U.S. Gulf Coast? That’s the subject of RBN’s latest Drill Down Report, highlighted in today’s blog, which describes the battle lines being drawn and the important roles LNG exports and Mexican demand will play in keeping U.S. gas markets in balance.

Tallgrass Energy’s Rockies Express Pipeline (REX) last week received final approval to begin construction on its Zone 3 Capacity Enhancement expansion project (Z3CE), which would expand east-to-west capacity out of the Marcellus/Utica shale production area to a record 2.6 Bcf/d. This project comes on the heels of REX’s East-to-West expansion (E2W), which came online last August and in one fell swoop gave Northeast producers their first substantial westbound firm forward-haul transportation capacity, totaling a full 1.8 Bcf/d. The upcoming Z3CE capacity (0.8 Bcf/d) will mark yet another milestone in the Great Pipeline Reversal that’s expected to ease supply congestion in the Northeast and support beleaguered Marcellus/Utica pricing points. That new capacity is not due in-service until late 2016. But now with nearly a full winter’s worth of pipeline flow data for the first E2W expansion, we can get a preview of potential impacts of the additional capacity on flows and pricing. Today we look at winter-to-date gas flows on REX and what they tell us about the Marcellus/Utica market.

Tallgrass Energy’s Rockies Express Pipeline (REX) opened the floodgates for Marcellus/Utica producers this Saturday, August 1, bringing online its Zone 3 East-to-West (E2W) expansion capacity. The expansion tripled westbound design capacity to a full 1.8 Bcf/d from the Marcellus/Utica producing region to delivery points in Ohio, Indiana and Illinois. Potentially this additional takeaway capacity eases supply congestion in the Northeast and will support beleaguered Marcellus/Utica pricing points. As REX touches nearly every part of the US gas market, the expansion can ultimately be expected to reconfigure gas flows and price relationships across multiple regions as it comes online. Today we review the changes and how quickly they are likely to impact the market.