The US Energy Information Administration (EIA) October Drilling Productivity Report showed a projected productivity increase of 160 Mcfd per rig in the Marcellus shale in November versus October. Each rig working in the Marcellus is estimated to contribute an average of 5.8 MMcfd of new production. Overall production in the Marcellus stands at nearly 12 Bcfd, according to EIA data.
Increased takeaway from the Marcellus is being aided by multiple pipeline expansion projects that are expected to begin service this winter. New projects focus largely on transporting natural gas to New York, New Jersey, and other Mid-Atlantic regions.
According to the EIA, current expansion projects through 2015 will add 3.5 Bcfd of additional gas supply to Northeastern markets.
Spectra Energy Corp. recently announced successful completion of its New Jersey-New York Expansion Project. The new pipeline is an extension of the company's Texas Eastern and Algonquin Gas systems. It is the first natural gas pipeline into Manhattan in 40 years and will deliver 800 MMcfd of natural gas supplies to greater New York—enough to heat 2 million homes per day.
The privately funded project cost $1.2 billion to construct. It added approximately 20 miles of new pipeline, new meter, and regulating stations and required modifications to existing facilities. Annual savings for customers in New Jersey and New York are estimated at $700 million in wholesale energy prices.
The EIA reported in early October that growth in natural gas production from the Marcellus region of Pennsylvania, West Virginia, and Ohio has lowered the spot price of natural gas at the TCO Appalachia trading point in recent years. Continued production growth will likely drive the price in this region further below the benchmark Henry Hub price in early 2014.
New England consumers may not see significant benefits from current pipeline expansion projects until 2016. The Algonquin Gas Transmission (AGT) pipeline takes gas from Marcellus and other regions to consumers in New England. Traditionally, this system has operated at near-full capacity during the winter. The Algonquin Incremental Market (AIM) project is the next planned expansion on the AGT pipeline. This project would enable an additional 0.42 Bcfd of gas to flow north to interconnect with the Millenium Pipeline in Rampoo, NY. The project currently has an in-service date of November 2016.
In the short term, Marcellus gas production continues to increase. Other projects, primarily along the Gulf Coast, are expected to receive much of this new production.
