Given their proximity to the Marcellus and Utica shale regions, the Midwestern states and Ontario would appear to be logical consumers of the increasing volumes of natural gas being produced in Pennsylvania, West Virginia, and eastern Ohio. The catch has been that the pipelines built years ago to serve the Midwest and Canada’s most populous province were designed to move gas into those regions from western Canada, the U.S. Gulf Coast, the Midcontinent and the Rockies, not the nearby Marcellus/Utica. That’s being corrected. Today we continue our look at how pipeline takeaway capacity will stack up against Northeast production over the next few years, with a focus on the Midwest and Ontario.
In Part 1 of this series, we looked at the Northeast production outlook and prospects for growth under three commodity price scenarios and found that even our most pessimistic production scenario will mean at least a little growth for Northeast supply. In Part 2, we began our look at the takeaway capacity side of things, starting with the East corridor. As we mentioned, RBN’s Midstream Infrastructure Database Interface (MIDI) is tracking 24 projects totaling 18 Bcf/d of Marcellus/Utica takeaway capacity at varying stages in the development and regulatory approval process. (That’s not all the projects – it is the projects most likely to provide incremental takeaway capacity over the next few years.) We organized the takeaway projects into five corridors: to the East (New England and Mid-Atlantic states), to Canada, to the Midwest via Ohio, to the Gulf Coast via Ohio, and to the Southeast along the Atlantic Coast (see Figure 1 in Part 2). There are a total of six projects (3.3 Bcf/d) gunning for takeaway capacity out of the Marcellus/Utica to the New England and Mid-Atlantic states to the east, with the majority of that capacity coming online after 2017. However, as we noted in Part 2, pipeline development to heavily populated markets from Maine to New Jersey is especially fraught with public opposition and regulatory challenges that could cause delays or cancellations. We also noted that demand in New England and the Mid-Atlantic states will be highly seasonal –– relatively modest during the off-peak summer season and high during cold winter months when demand from space heating kicks in. Those incremental takeaway flows also will depend on demand growth within the region.
Pipelines to the Midwest
So next we look at the takeaway projects that will allow Northeast supply to seek out demand markets outside the region, starting with the Midwest corridor. As we mentioned in Part 2 of this series, there are four projects totaling 4.3 Bcf/d of westbound takeaway capacity planned from the Marcellus/Utica via Ohio to the Midwest. Pipeline reversals and expansions out of the Marcellus/Utica to the Midwest give producers access to the large markets in Chicago, Indianapolis, Detroit and other Midwest demand centers, and have already had the effect of squeezing out the traditional suppliers to that market, including western Canadian, Anadarko Basin and Rockies producers.