Rover Pipeline

On June 1, Energy Transfer Partners’ new Rover Pipeline began service on its market segment from northwestern Ohio into southern Michigan, effectively sending nearly 800 MMcf/d of Marcellus/Utica gas production to Vector Pipeline and its northern destinations in Michigan, and, by extension, to the Dawn Hub. This latest in-service has already shuffled flows in the region and pushed back on other supplies targeting the same markets, including Canadian gas imports. And that’s even before the project has achieved its full expected capacity of 3.25 Bcf/d. Today, we analyze the early effects of Rover’s first flows to the Michigan/Dawn markets via Vector.

Energy Transfer Partners’ 3.25-Bcf/d Rover Pipeline recently began service on its next phase — Phase 1B — opening up additional natural gas receipt points for its Mainline A and increasing westbound gas flows from the Marcellus/Utica. The project will help relieve takeaway constraints for growing gas supply in the Marcellus/Utica region, while also increasing gas-on-gas competition for supply basins targeting the Ontario and Gulf Coast markets. This latest launch brings the project closer to achieving full completion, which is expected by the end of March 2018, but volumes on Rover are already changing regional flow and pricing dynamics. Today, we provide an update on Rover’s progress.

A year ago, Lower-48 natural gas production was in steep decline and averaging less than 71 Bcf/d by the fall, down from nearly 74 Bcf/d in February 2016. The oil-price crash of 2014 had taken a toll on gas output, led by a drop in Texas. To add to that, Marcellus/Utica gas supply — which had helped prop up overall domestic gas production volumes — was no longer growing enough to offset those losses. The resulting decline in Lower-48 production helped to correct a huge storage imbalance that had developed in the market following the brutally mild winter of 2015-16. That’s a far different picture than what’s happened in 2017. Gas production began this year below 70 Bcf/d, but has climbed to more than 74 Bcf/d in the past couple of months. And just last Thursday (October 26), production set a new record of 75.7 Bcf/d, exceeding the previous single-day record of 75.1 Bcf/d set in April 2015. Several of the major supply basins are contributing to that uptick, but Marcellus/Utica gas production is again leading the pack. Today, we check in on Northeast gas production using pipeline flow data. 

Permian natural gas production recently topped 7 Bcf/d and shows no signs of slowing its growth trajectory. While new pipelines are expected to move additional Permian gas volumes to the Gulf Coast markets by the beginning of 2020, the current paths to those markets are full. Over time, Mexico is expected to export significant volumes directly from Waha, but current amounts are relatively small. As a result, increasing volumes of gas are leaving the Permian on the pipelines that head west to California and north to the Midcontinent. However, the pricing in these markets is downright ghoulish compared to the Gulf Coast and Permian gas is increasingly finding itself in scary market conditions. Today, we analyze recent pricing and flow trends in the Permian natural gas market.

The U.S. natural gas market tightened considerably in 2016, with a pull-back in production volumes leaving total gas supply, including imports, within a hair’s breadth of total demand (including exports) on an annual average basis. In 2017, however, gas production has climbed again. And it’s not just from the Marcellus/Utica, which grew through even the downturn over the past few years, but also from other basins, particularly ones focused on crude oil. Current production economics and drilling activity suggest continued growth over at least the next five years. Could it be too much? Will demand expand fast enough and will all the growing supply regions be able to access that demand? Or, are producers headed for another contraction before they’re barely out of the last one? In today’s blog, we begin a series unpacking RBN’s five-year natural gas supply-demand outlook.

In another key milestone for Northeast pipeline takeaway capacity expansions, Energy Transfer Partners’ beleaguered Rover Pipeline project began partial service on its Phase 1A portion on gas day September 1. The 3.25-Bcf/d project, which is due for completion in early 2018, is expected to provide relief for constrained Northeast producers while exacerbating oversupply conditions and gas-on-gas competition in the Dawn, Ontario, storage and demand market area and surrounding region. Within days of initial start-up, flows on Rover ramped up to 700 MMcf/d, and both Ohio and overall Northeast production already have posted record highs since then as a result. Today, we take a look at the project, including initial flows and the expected timing of full completion.

With the start-up of new capacity on Energy Transfer Partners’ Rover Pipeline out of the Southwest Marcellus and Utica now a reality and the service on several other pipeline expansions out of the Northeast expected to begin soon, some of the questions that have been vexing the market for years are about to be answered. Principal among these: How much will natural gas production in the region grow and how fast? How will Northeast supply growth affect the larger U.S. market? And how will supply growth across the country compare with increasing demand? (Hint: the numbers could be staggering, the impact will be too, and there could be a big supply/demand disconnect.) Today we examine how a prospectively huge supply/demand imbalance in the U.S. natural gas market might be rectified.

On August 4, the U.S. Senate confirmed two new commissioners for the Federal Energy Regulatory Commission (FERC), restoring the three-member quorum legally required for FERC to vote. The Senate action ended a six-month dry spell during which FERC could not issue any orders, and thus could not approve any of the many pipeline projects pending there. What does it mean that FERC can act again to approve new projects? And does that mean the industry can move forward at the pace it needs? Today we explore these questions and assess what it will take to get some key gas infrastructure projects back on track.

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.

Natural gas producers in the Canadian province of Alberta have had a heck of a time in recent years. Marcellus/Utica gas production has flooded markets in eastern Canada and the U.S. Northeast and Midwest, squeezing out Alberta gas in the process. Also, Alberta gas producers’ dreams of piping gas west to the British Columbia coast for export to Asia as LNG have been thwarted. Lucky for them, though, gas demand within Alberta is on the rise, thanks to increasing use of gas in the oil sands and a decision by the province’s largest power generator to shift from coal- to gas-fired generation and renewables. Today we update gas output and consumption trends in Canada’s Energy Province.