New Analysis Focuses on Impacts of Clearing the Marcellus-Utica Gas Clog
Anticipated pipeline capacity expected to relieve massive bottleneck in Northeast and drive natural gas prices up
Media Contact: Jon Haubert | 303.396.5996
Austin, TX (Mar. 20, 2018) – In the latest installment of its FundamentalEdge series, Drillinginfo has released Northeast Gas Midstream, a market outlook report focused on the Northeast region of the United States and price impacts created by the massive amounts of natural gas produced from the Marcellus and Utica formations in Pennsylvania and Ohio. Traditionally, the Northeast gas demand has been met by producers in the Southeast/Gulf of Mexico, Midcontinent, and Canada regions. However, production in the Marcellus and Utica has risen sharply over the past ten years — from about 2 Bcf/d in 2008 to more than 26 Bcf/d as of February 2018 — and now represents 35 percent of total dry gas production in the United States.
“This rapid and immense growth in the Marcellus-Utica has created tremendous challenges for natural gas producers over the past ten years, the most significant being bottlenecked pipeline takeaway capacity,” noted Maria Sanchez, manager of energy analytics at Drillinginfo and lead author of this quarter’s market outlook report. “That bottleneck has caused gas prices to drop in the region. Pipeline infrastructure operators have responded by changing flow direction in existing pipelines and expanding capacity. However, those capacity additions haven’t kept up with production growth, and basis has remained depressed — thus far,” Sanchez added.
In Northeast Gas Midstream, Drillinginfo analysts point to anticipated pipeline capacity constraints to end in 2018, when key takeaway projects will come online and add over 5 Bcf/d of additional Northeast pipeline takeaway capacity. Energy Transfer Rover Phase 2, Transco’s Atlantic Sunrise, Nexus Gas Transmission, and Columbia’s Gulf Xpress projects will, in effect, debottleneck the region during the third quarter. Regional gas basis is therefore expected to trade within variable transport costs of about $0.20–$0.30 per MMBtu below Henry Hub.
Based on Drillinginfo’s pricing expectations of Henry trading somewhere between $2.65 and $2.75 MMBtu over the next five years, by 2021, production in the Northeast will reach almost 30 Bcf/d, an increase of more than 5 Bcf/d from current levels.
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