Natural gas demand is building fast along the Gulf Coast. New LNG export terminals, data centers and power generation — and new pipelines to deliver the incremental gas. That’s all baked in. What’s still far from certain is where all the gas will come from, and how intense the battle for gas supply will become.
We’ve blogged about rising demand for natural gas in the southeastern U.S. and the pipeline projects being planned there. But there’s more to the story — a bigger picture — namely, that gas consumers in the region increasingly find themselves competing for supply with LNG exporters.
Just downstream from the Appalachian supply basin — where daily spot natural gas prices are among the lowest in the country — cash and forward prices in the Mid-Atlantic and Southeast have rocketed, becoming the highest gas prices in the land, and in some cases are at never-before-seen levels for this time of year. No doubt it’s been a sweltering summer so far, and low storage levels aren’t helping either. But there’s more to the price premiums than that. Limited access to supply and constraints on Williams’ Transco Pipeline — the primary system delivering gas to the region — have created a demand “island” there just as persistent heatwaves boosted cooling demand. Moreover, without additional pipeline capacity, the dynamics unfolding this summer could become a regular feature of the Southeast/Mid-Atlantic markets. In today’s RBN blog, we break down the factors driving regional prices to new heights.
Only a few years ago, pretty much all the natural gas flowing through pipelines in the southeastern U.S. was headed north to serve demand in the Northeast and the Midwest. But that’s all been changing — and fast. Gas production in the Marcellus/Utica has soared and now meets the needs of the Northeast and more. And, as LNG exports from the Gulf Coast ramp up and Southeast gas demand for power generation rises, more and more Marcellus/Utica gas is flowing south, raising the question of whether pipes in the Southeast can handle it all over the long term. Today, we discuss the findings of RBN’s work in preparing a study for the American Petroleum Institute (API) on the adequacy of regional gas pipeline infrastructure. RBN’s work discussed here is the current analysis being used to inform and develop stakeholder briefings. We anticipate API will release the final version in report form, after its completion.
We talk a lot here in the RBN blogosphere about the bearish market effects of the Shale Revolution, and frequently highlight the U.S. Northeast natural gas region — rapidly growing gas production from the Marcellus/Utica; oversupplied, trapped-gas conditions; and resulting regional price discounts. These dynamics are driving massive investments in pipeline reversals, expansions and new capacity to move the gas to market. Northeast producers are counting on that increase in takeaway capacity to relieve price pressure and balance the market. But all this gas moving out of the region needs a home. Fortunately, new demand is emerging, from exports (to Mexico and overseas LNG) and into the U.S. power sector. One of the big growth regions is the U.S. Southeast, where power utilities are investing heavily in building out their fleet of gas-fired generation plants and are banking on this new, unfettered access to cheap Marcellus/Utica gas supply. Today’s blog provides an update on power generation projects coming up in the southern half of the Eastern Seaboard, based on a recent report by our good friends at Natural Gas Intelligence — “Southern Exposure: Gas-Fired Generators Rising in the Southeast; But Will Northeast Gas Show Up?”
Most of the gasoline, diesel, heating oil and jet fuel consumed in the U.S. East Coast region is piped in via long-distance pipelines from Gulf Coast refineries, but substantial amounts are moved in by ship—either from the Gulf Coast by Jones Act vessels or from overseas. These shipped-in volumes then need to make their way from port to consumer. Today we continue our examination of how transportation fuels and heating oil are delivered to East Coast users with a look at the ports and connecting pipelines that help move these critically important fuels.
The economics of natural gas production in the dry Marcellus, the wet Marcellus and the Utica are so favorable—and the shale gas resource so bountiful—that the only real limit on how much the Marcellus/Utica plays can produce is the capacity of the pipeline network in the Northeast and neighboring regions to take gas to market. And there’s the rub, because the region’s gas transmission infrastructure was designed decades ago to deliver large volumes of gas to the Northeast, not away from it. That’s why the midstream sector has made “a new plan, Stan,” and is now in the midst of a major reworking of the pipeline system—not just within and near the Marcellus/Utica but just about everywhere east of the Mississippi. The $30 billion re-plumbing effort and its effects on the gas market as a whole are the subject of RBN’s latest Drill-Down Report, “50 Ways to Leave The Marcellus” which is available today to Backstage Pass members. In today’s blog, we provide an overview.
