Rick Margolin
Genscape, Boulder, Colo.
Colette Breshears
Genscape, Houston
Two major pipeline projects involving the Marcellus and Utica shales recently announced an August in-service date. Both projects will support further increases in East production and should be supportive of basis prices in those producing areas.
However, some of the price gains may be muted by expectations of weak downstream demand growth in markets targeted by the projects.
Texas Eastern (TETCO) announced its Uniontown-to-Gas-City (U2GC) expansion project was expected to be brought online Aug. 1, which compared with a previous no-later-than Nov. 1 completion TETCO listed in Federal Energy Regulatory Commission filings.
U2GC will provide 425 MMcfd of new capacity to flow gas westward to the TETCO interconnect with Panhandle near Gas City, Ind., to serve Midwest markets.
In August, service was scheduled to be available from TETCO's Uniontown compressor in southwestern Pennsylvania to Lebanon in southwestern Ohio.
Service from Lebanon to Gas City was scheduled to be available Sept. 1. A notice said EQT Midstream Partners LP, Range Resources, and Rice Energy intend to begin utilizing their contracted capacity on the expansion on Aug. 1.
Those companies collectively have nearly 300 MMcfd of capacity contracted. The remaining two shippers, CNX Gas and East Resources, were scheduled to begin shipping in September.
Also as of early July, the Rockies Express Pipeline (REX) stated the Zone 3 East-to-West Project was to be in-service on Aug. 1. The project will provide an additional 1,200 Mcfd of firm westbound service.
Once completed, Zone 3 on REX will be able to flow a total of 1,800 MMcfd bidirectionally between the Clarington Hub in eastern Ohio and an interconnect with NGPL at Moultrie, Ill. The pipeline will access interconnects along the way with NGPL, ANR, Midwestern, Panhandle, and Trunkline. REX had been able to flow as much as 1,140 MMcf/d westward as far as central Indiana as of early July.
The U2GC and REX East-to-West projects should accelerate Eastern production growth by providing critical outlets for otherwise constrained production gas. Genscape's SpringRock Natural Gas Production Forecast anticipates the REX project could generate an additional 300 MMcfd of production growth in August vs. July.
A similarly large, though slightly smaller increase, could occur from the U2GC project.
Both projects should fundamentally be supportive of basis prices in the Marcellus-Utica supply area. However, Genscape anticipates some of the potential uplift might face headwinds due to conditions in the downstream markets that the projects target. Genscape does not anticipate robust structural demand growth in the Midwest in coming years.
Without demand growth, new molecules of gas are going to have to move into the Midwest by displacing incumbent supplies from production areas in the Mid-Continent, Rockies, and Canada production areas. This will have to be done through pricing, which may take some steam out of the price gains generated by near-term expansion projects out of the East producing areas.
Editor's note: This is used with permission from a Genscape blog.
