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Released September 24, 2015 | SUGAR LAND
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Written by John Egan for IIR Energy (Sugar Land, Texas)--Natural gas producers in the Marcellus Shale have long been victimized by inadequate processing and outbound transportation capacity. But IIR Energy's NatGasLive application is tracking several small pipeline construction projects in the Marcellus area that are scheduled to finish during the next six weeks, easing bottlenecks and bringing more low-cost gas to market.
The projects that are nearing completion are short laterals, or extensions that link to existing pipeline hubs or compressor stations. Once completed, they will increase liquidity in the market by adding more optionality to shippers and producers. Exactly how these projects will affect prices and producer netbacks is hard to determine, as pricing is a function of supply as well as demand. At present, the gas market in and around the Marcellus and Utica shales is oversupplied, due to sharply rising production and demand that has not risen as rapidly as production. IIR Energy believes the added liquidity will not meaningfully increase prices or producer netbacks.
These small pipeline projects are only the near-term phase of a planned surge in construction of pipelines and midstream projects in the Marcellus and Utica area, which are being developed to match projected strong gas production growth from those formations.
Today, nearly 25% of U.S. natural gas comes from the Marcellus Shale, a formation that lies under portions of Pennsylvania, New York, West Virginia and Maryland. Gas production there is slightly more than 16 billion cubic feet per day (cf/d), according to the U.S. Energy Information Administration (EIA) (Washington, D.C.).
The Utica Shale, a formation under eastern Ohio that many see as the next Marcellus, is producing about 2.75 billion cf/d now, the EIA said. Both have "hockey stick" growth patterns, and consultants have projected combined production from the two formations will reach about 34 billion cf/d by 2035. That level of production would make the Marcellus-Utica shales the source of about one-third of all U.S. natural gas production.
Click on the images at right to see current gas production in the Marcellus and Utica shales.
"Production of associated gas has tapered off slightly for the Marcellus and Utica, in light of low oil and natural gas liquids (NGL) prices," said Jesus Davis, Industrial Info's vice president of research for Oil & Gas Production, Pipelines and Terminals industries. "And while the economics of producing gas that is not associated with oil or NGLs continues to be a challenge, for many producers, the options are, in effect, produce now and receive a low price, or cut back production and shrink your revenue stream. At a time when a very high percentage of operators' free cash flow is going to debt service, continued production appears to be the lesser of two evils."
IIR Energy's NatGasLive application is tracking several small pipeline projects that would move a large volume of new gas from the Marcellus and Utica to end-use markets. These projects are scheduled to be complete by mid-November, just in time for the surge in winter gas demand. The projects include:
NatGasLive is tracking other large pipeline projects in the Marcellus/Utica region that are scheduled to kick off in the near future, including:
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The projects that are nearing completion are short laterals, or extensions that link to existing pipeline hubs or compressor stations. Once completed, they will increase liquidity in the market by adding more optionality to shippers and producers. Exactly how these projects will affect prices and producer netbacks is hard to determine, as pricing is a function of supply as well as demand. At present, the gas market in and around the Marcellus and Utica shales is oversupplied, due to sharply rising production and demand that has not risen as rapidly as production. IIR Energy believes the added liquidity will not meaningfully increase prices or producer netbacks.
These small pipeline projects are only the near-term phase of a planned surge in construction of pipelines and midstream projects in the Marcellus and Utica area, which are being developed to match projected strong gas production growth from those formations.
Today, nearly 25% of U.S. natural gas comes from the Marcellus Shale, a formation that lies under portions of Pennsylvania, New York, West Virginia and Maryland. Gas production there is slightly more than 16 billion cubic feet per day (cf/d), according to the U.S. Energy Information Administration (EIA) (Washington, D.C.).
The Utica Shale, a formation under eastern Ohio that many see as the next Marcellus, is producing about 2.75 billion cf/d now, the EIA said. Both have "hockey stick" growth patterns, and consultants have projected combined production from the two formations will reach about 34 billion cf/d by 2035. That level of production would make the Marcellus-Utica shales the source of about one-third of all U.S. natural gas production.
Click on the images at right to see current gas production in the Marcellus and Utica shales."Production of associated gas has tapered off slightly for the Marcellus and Utica, in light of low oil and natural gas liquids (NGL) prices," said Jesus Davis, Industrial Info's vice president of research for Oil & Gas Production, Pipelines and Terminals industries. "And while the economics of producing gas that is not associated with oil or NGLs continues to be a challenge, for many producers, the options are, in effect, produce now and receive a low price, or cut back production and shrink your revenue stream. At a time when a very high percentage of operators' free cash flow is going to debt service, continued production appears to be the lesser of two evils."
IIR Energy's NatGasLive application is tracking several small pipeline projects that would move a large volume of new gas from the Marcellus and Utica to end-use markets. These projects are scheduled to be complete by mid-November, just in time for the surge in winter gas demand. The projects include:
- Construction of two laterals to the Bear Creek Leidy Southeast Natural Gas Pipeline. The completion of the laterals will enable the pipeline to transport up to 525 million cf/d of gas from Luzerne County, Pennsylvania, to Monroe County, Pennsylvania. The project is being developed by a unit of The Williams Companies (NYSE:WMB) (Tulsa, Oklahoma).
- Build two miles of 24-inch-diameter gas pipeline that will parallel the existing Line N, operated by National Fuel Gas Company (NYSE:NFG) (Williamsville, New York). The new pipeline will be able to transport up to 175 million cf/d of natural gas from Mt. Pleasant Township in Washington, Pennsylvania, to Independence Township in Beaver County, Pennsylvania.
- Construct 9.5 miles of 26-inch-diameter pipeline, as part of the East Side Expansion Project in Pennsylvania and New Jersey, which is being developed by Columbia Gas Transmission Corporation, a unit of NiSource (NYSE:NI) (Merrillville, Indiana). The new line will be able to transport up to 312 million cf/d from the Eagle Compressor Station in Upper Uwchlan, Pennsylvania, to the Downingtown Compressor Station in West Bradford, Pennsylvania.
NatGasLive is tracking other large pipeline projects in the Marcellus/Utica region that are scheduled to kick off in the near future, including:
- The Atlantic Coast Pipeline, a $5 billion, 550-mile proposed pipeline, is scheduled to bring up to 1.5 billion cf/d from the Marcellus and Utica shales to power plants, homes and industrial facilities in North Carolina and Virginia. The developers plan to begin turning dirt next year, assuming all permits are received, and gas could be flowing by late 2018. The project is owned by Dominion Resources Incorporated (NYSE:D) (Richmond, Virginia), Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina), Piedmont Natural Gas Company Incorporated (NYSE:PNY) (Charlotte) and AGL Resources Incorporated (NYSE:GAS) (Atlanta, Georgia).
- The Rover Pipeline, a $4.2 billion, 711-mile project being developed by Energy Transfer Partners LP (NYSE:ETP) (Dallas, Texas). Energy Transfer Partners has signed long-term firm shipping commitments for about 3.25 BCF/d, making the proposed pipeline fully subscribed. The project will bring gas from the Marcellus and Utica shales to states in the Midwest, Northeast, East Coast, Gulf Coast and Ontario, Canada. Construction on Rover is expected to begin in the first quarter of 2016, assuming all permits are approved on schedule. Construction to Defiance, Ohio, is expected to finish by the end 2016, and by June 2017 the pipeline is due to extend into Michigan.
- The Mountain Valley Pipeline, owned by units of EQT Corporation (NYSE:EQT) (Pittsburgh) and NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida), is a $2.5 billion to $3.5 billion project that developers plan to run for about 300 miles from northwestern West Virginia to southern Virginia. The pipeline, which could transport up to 2 BCF/d of Marcellus and Utica gas, could be operating by 2018 if all permits are received.
- The Leach Xpress is a $1.4 billion project being developed by Columbia Gas Transmission, a unit of NiSource Incorporated (NYSE:NI) (Merrillville, Indiana). That project is expected to transport up to 1.5 BCF/d from the Appalachian Basin to interconnections with sibling pipelines Columbia Gas and Columbia Gulf. The developer expects to kick off construction in late 2016 and have the pipeline operating by late 2017.
- The Atlantic Sunrise pipeline, a $548 million project, is being developed by Transcontinental Pipeline, a subsidiary of The Williams Companies. It is scheduled to transport gas eastward from the Marcellus Shale for 200 miles, to points including the Cove Point liquefied natural gas (LNG) terminal in Chesapeake Bay, Maryland. This project, scheduled to begin construction next summer, has an in-service date of mid-2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
