For decades natural gas flows have moved to the huge Northeast demand region from the Gulf, Canada, Rockies and Midcontinent. Now those flows are being reversed by the Marcellus and Utica plays that will soon be producing more gas than the Northeast can use. How do the pipelines that serve the region deal with this transition commercially? Operationally? Physically? Today we will explore these questions and consider several terms that have become all-important in this upside-down gas world – backhauls, reversals, and null points.
Recap From Get Back to Where You Once Belonged –REX Reversal
This blog is an epilogue to our recent series titled “Get Back to Where You Once Belonged –REX Reversal and Implications for Marcellus/Utica”. In that series, Part 1 compared the pipeline capacity constraints faced by Rockies producers a few years ago – and resolved by REX -- with similar constraints that Marcellus/Utica producers are dealing with today. Part 2 looked at how quickly gas production has increased in Marcellus/Utica, and how pipeline developers are scrambling to catch up. And Part 3 examined the implications for reversing REX flows into the Midwest market and which traditional supplies in that market will likely be displaced.
On several occasions during the REX Reversal series we used the terms “displacement” and “backhaul”, sometimes talked about “reversals” but avoided another important term “null point”. It would have been better to define all of these terms up front, but we may have lost you as a reader if we went into a dissertation on terminology before getting to the point of the series. But now that we’ve completed that assignment it makes sense to go back and explore these terms, just to make sure everyone understands how pipeliners use the words and why they will be so important in the future gas market. Our goal is that after reading this blog you too can impress and confuse your friends by throwing these terms around indiscriminately.
It’s About the Marcellus/Utica
All this matters because of the huge growth in natural gas production in the Marcellus/Utica. The Appalachian region certainly has a long and storied history of oil and gas production, but in recent decades it was a sleepy legacy producing region with about 2.0 Bcf/d of ancient production from low pressure wells, some of which have been flowing for 50+ years. Most of this gas went to local markets. The huge New England and Atlantic seaboard demand regions just next door to the legacy Appalachian production had to look to the Gulf, Canada, Midcontinent, the Rockies and offshore LNG for supplies. Long-line systems like Transco, Tennessee, Columbia Gulf, Texas Eastern, TransCanada, Rockies Express and others moved gas from distant producing basins to the Northeast market to meet demand.
Then shale happened. Marcellus/Utica production roared into the market, growing a phenomenal 10 Bcf/d in four years by mid-2013. Pipelines fortunate enough to traverse the Marcellus/Utica plays started to receive gas far downstream of their traditional producing regions. At first the downstream gas they received simply displaced gas they had historically moved to the Northeast from upstream sources. But eventually some pipelines started to receive more downstream gas than they needed for their downstream markets, thus requiring physical reversal of their systems to move gas away from the prolific new Appalachian producing regions.
That seems simple enough. Just turn the compressors around and start pumping the gas the other direction. Well as you might expect, it is a bit more complicated than that. Especially when you consider seasonality. In the winter, Northeast demand is so large that gas will need to flow into the region. But in the summer the region will have too much gas and flows will need to be outbound. Thus pipelines serving the region can’t simply turn flows around. They have to be able to deal with flows that sometimes will move west-to-east and sometimes east-to-west. Complicating matters further, at some point in the future east-to-west flows out of the Northeast will prevail for most of the year when Marcellus/Utica production gets high enough.
We are reminded of the old joke – In 1967 the Swedish decide to convert their roads from driving on the left hand side to driving on the right. But lawmakers in the Riksdag decreed that to ease the transition it would be done in phases – starting with trucks. (That never was much of a joke.)
Fortunately natural gas doesn’t behave like trucks on a highway. In fact, if you are used to the ‘garden hose’ flows on NGL or crude oil pipelines, natural gas is quite different. In liquid flow pipelines, flows work like your garden hose – put liquid in one end, and soon it will flow out the other end, being pushed along by new volumes coming in at the receipt end.
But gas is a gas. And pipeline quality gas is fungible , meaning that the quality of most pipeline natural gas in North America is the same – within relatively strict specifications. So within some reasonable limits, theoretically it doesn’t matter where you put gas in and where you take it out. Think of a natural gas pipeline working more like a balloon than a garden hose. Blow in to the balloon (compress, or pressure up the gas) and it will flow out of the balloon whenever and wherever the pressure is released. It may not be the same gas you put in, but it doesn’t matter since it is all the same stuff. Or you may like the ATM analogy better - put a dollar in here, get it out over there, but don't expect the bank to carry your dollar from point to point.
Natural Gas Pipelines and Flow Characteristics
To see how this works in practice it is helpful to consider two of the most typical natural gas pipeline configurations in North America, shown in Figure #1. The ‘Trunkline’ or ‘Long-Line’ example on the left is representative of many of the traditional pipeline systems feeding the Northeast mentioned above. Gas is injected from wells in the producing region (red dots 1,2 and 3) into a pipeline running hundreds of miles to the demand region where it delivers into utilities, power plants or factories (blue dots a, b, and c). In this case, the gas pipeline operates somewhat similar to a liquids “garden hose’ pipeline. But that’s not the only configuration that works for all natural gas systems.
To access the remainder of Upside-Down: Natural Gas Pipeline Backhauls, Reversals and Null Points you must be logged as a RBN Backstage Pass™ subscriber.
Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at firstname.lastname@example.org or 888-613-8874.