Enbridge/DTE Energy’s 1.5-Bcf/d NEXUS Gas Transmission pipeline saw its first natural gas flows this week, as the Federal Energy Regulatory Commission (FERC) approved partial service on the project, opening another nearly 1 Bcf/d of capacity from Appalachia’s Marcellus/Utica producing region to the Midwest. NEXUS marks the last big westbound takeaway project from the Northeast, except for the remaining pieces of Energy Transfer’s (ETP) Rover Pipeline. It also marks the escalation of gas-on-gas competition in the Midwest market, where U.S. Midcontinent and Canadian gas supplies are also battling it out for market share. Today, we take a closer look at the NEXUS project and its potential implications for the Northeast and Midwest gas markets.
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.
For years, the U.S. Midwest has been a perennial net exporter of natural gas to Eastern Canada. But with Marcellus/Utica and Canadian gas supplies barraging the region, that’s changing. Less Midwest gas is flowing across the border into Ontario. At the same time, Canadian gas supply that used to serve U.S. Northeast demand is being displaced to the Midwest. That’s on top of Marcellus/Utica gas that’s physically moving to the Midwest via new capacity on the Rockies Express and Rover pipelines. The result is that the Midwest’s net exports to Canada are declining and even flipping into net imports during some summer months when the market is in storage injection mode. Thus far, this reshuffling of supply has occurred at the expense of Gulf and Midcontinent gas that historically has served the Midwest. But now there’s little of that left to displace from the Midwest, even as still more supply is expected to move there. Canadian producers are banking on capturing more of the Midwest market, as are Northeast producers via expansions like Rover’s Phase II and NEXUS. In other words, there’s a fierce battle brewing for Midwest market share. Today, we look at flow dynamics and factors affecting Canadian gas flows to the U.S. Midwest.
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.
Surging natural gas production volumes in the Marcellus/Utica will need to move in just about every direction. No single market—not the Northeast, the Midwest, the Southeast, or even the Gulf Coast—is big enough to absorb it all. Midstream companies are considering every cost-effective way to replumb and expand their existing pipelines to add takeaway capacity, and when still more is needed, are turning to greenfield projects. In this, the first of several company-by-company episodes on who is planning what, we examine Spectra Energy’s plans to add at least 2 Bcf/d of new Marcellus/Utica takeaway capacity by 2017, and maybe another 2 or 3 Bcf/d by the end of the decade.
Over the past two years, natural gas production from the Appalachian region has soared with growth in the Marcellus pushing total production beyond 10.5 Bcf/d. Just next door the Utica Shale is coming into focus with attractive economics due to the natural gas liquids, crude oil and condensate production. The looming question is natural gas takeaway capacity. With Marcellus production continuing to grow and Utica supplies coming on, production in the Northeast will soon exceed regional consumption and will need to be moved out of the region to other markets in the U.S. and Canada. To accomplish this, new pipelines have been proposed and reversals of existing infrastructure that was originally built to transport gas into the region are being implemented. Today we review another of the proposed projects.
Canada imports as much as 2 Bcf/d of natural gas from the US in the region around the Dawn trading hub. The Dawn system has traditionally been fed by Western Canadian supplies and long haul pipelines from the US Gulf, Midwest and the Rockies. Marcellus gas can already reach Dawn via the border crossing at Niagara to the East. The Nexus Gas Transmission project will bring 1 Bcf/d directly into Dawn from the Utica. Today we detail the changing flows.