Pipeline expansion

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.

Marcellus/Utica natural gas production volumes this past Saturday (November 4) set a record high of more than 23 Bcf/d, according to pipeline flow data. As a result, overall Northeast production flows on the same day also posted a milestone, with volumes approaching a record 25.3 Bcf/d. This is up ~2.7 Bcf/d from where they started the year. These gains have been made possible because of the numerous pipeline projects that have added takeaway capacity from the region, about 2.4 Bcf/d since last winter alone. Moreover, another ~4.3 Bcf/d in new takeaway capacity either was approved for in-service last week or is expected online before March 2018. Even at partial utilization through the winter, that’s a lot of capacity that could flood the market with new supply. Where is all that capacity headed? In today’s blog, we look at recent and upcoming capacity additions that will affect the gas market this winter season.

After years of oversupply conditions and pipeline constraints, the U.S. Northeast natural gas market is on the verge of reaching a point where it is unconstrained by transportation capacity and enjoys increased optionality for reaching growing demand markets downstream. There are no fewer than 20 pipeline projects in the works to facilitate that. If all – or even most of them get built, the region would develop the opposite problem — not enough gas to fill all that new pipe. Ultimately, the state of the Northeast market will come down to the timing of the expansions projects compared with the pace of production growth. Today, we conclude this series with a look at how supply will line up with pipeline expansion in-service dates over the next five years.

For years now, U.S. Northeast natural gas production growth has been paced by the availability of pipeline takeaway capacity out of the Marcellus/Utica shales. Midstream companies have been racing to build the infrastructure to support drilling and rising supply in the region. And, until now, it was safe to assume that as new pipeline projects come online, volumes would grow to fill them in short order. But over the next couple of years, that may flip:  takeaway capacity additions could soon outpace supply increases, and producers might not be able to keep up. Today, we provide an update of RBN’s Northeast gas production scenarios.

A record amount of natural gas supply — close to 8.0 Bcf/d — from the Marcellus and Utica shale plays is making its way to the broader U.S. market. That’s happened with the help of a substantial build-out of pipeline infrastructure to reverse gas flows out of the now oversupplied Northeast, which has allowed regional production to grow to nearly 23 Bcf/d from less than 8 Bcf/d five years ago. One of the major target markets for this gas has been the Midwest. About a third of current outbound flows is heading to the Midwest, primarily via the reversal and expansion of Tallgrass Energy’s Rockies Express Pipeline, completed earlier this year. Moreover, midstream companies are due to install an additional 5.5 Bcf/d or so of takeaway capacity to target the Midwest and Canada by late 2020, with 70% of that due this year alone, starting with Energy Transfer’s Rover Pipeline. However, many of these expansion projects have been embattled by regulatory, environmental and political hurdles during the approval process. Today we provide an update of Rover and other Midwest- and Canada-bound takeaway projects.

Plans for LNG export terminals, petrochemical plants and gas-fired power generation along the Gulf Coast have made it the #1 target market for Marcellus/Utica natural gas producers. At the same time, these demand projects along the coast, from the Southeast, Texas and even farther down in Mexico, are counting on more supply growth from Appalachia. Since 2014, close to 5.0 Bcf/d of southbound pipeline capacity has been added and another 4.0 Bcf/d is due by early 2019. Today, we continue our update of pipeline expansions out of Appalachia, this time with a focus on the Ohio-to-Gulf Coast corridor.

One of the major target markets for Appalachian natural gas is the U.S. Southeast. More than 32 GW of gas-fired power generation units are planned to be added in the South-Atlantic states by 2020 and LNG exports from the Southeast are increasing. Of the 15.5 Bcf/d of takeaway capacity planned for Appalachia, close to 5 Bcf/d is targeting this growing demand. Despite the need, these pipeline projects designed to increase southbound flows from the Marcellus Shale have faced regulatory delays and setbacks. Today, we provide an update on capacity additions moving gas south along the Atlantic Coast.

Since 2013, nearly 3.0 Bcf/d of natural gas pipeline capacity has been added from Appalachia to the heavily populated, hard-to-reach demand centers along the East Coast. And another nearly 3.0 Bcf/d is in the works. The need for gas supply reliability in the heavily populated East, along with producers’ need to move their gas to market, is driving these expansions. But concentrated population centers, along with the geography, geology and regulatory environment of the area, all also make it tough and expensive for upgrading, expanding and developing the gas transportation system. Many of the proposed projects have been delayed or canceled as a result. Today, we provide an update on eastbound pipeline expansions from Appalachia.

For years now, limited natural gas pipeline takeaway capacity has constrained gas production growth in the Marcellus/Utica natural gas shale plays in the Northeast. To fix that, a slew of pipeline projects were planned to relieve the constraints as regional supply began outstripping demand starting in 2014. Now, the region is on the verge of being unconstrained for the first time since the Shale Revolution hit Appalachia. Many of those projects have come online since then, and another 19 expansions totaling 15.5 Bcf/d are planned for completion by late 2019. If all goes as expected, this next round of projects should turn the Northeast market on its head again, as the capacity additions should start to outpace production growth. The problem, though, is that several projects have faced significant challenges in recent months, resulting in either cancellation or major delays. At the same time, Marcellus/Utica production growth has slowed dramatically in the past 18 months or so. In today’s blog, “In a Northeast Minute…Everything Can Change — An Update of Marcellus/Utica Takeaway Projects,” Sheetal Nasta begins a series looking at the status of regional takeaway capacity expansions.

<p>Northeast regional interstate pipeline companies are coming to terms with an extra 7 Bcf/d of new Marcellus production in the past two years and maybe another 10 Bcf/d of growth between now and 2017.</p>