Infrastructure constraints in the Northeast, particularly in Northern Pennsylvania, have led Marcellus prices to diverge from the Henry Hub since May 2012.
Additionally, BENTEK Energy LLC (Bentek) reported that infrastructure constraints have led Northeast Pennsylvania production to flatten in recent weeks. Bentek estimates that more than 1,000 wells have been drilled but are not yet producing because of insufficient pipeline capacity. Several infrastructure projects have been proposed recently to help ease constraints in the region:
- Earlier this month, Williams Partners LP (Williams) announced plans for a major infrastructure expansion in Pennsylvania that would expand capacity on its existing Transcontinental Pipeline’s Leidy Line by 800 million British thermal units (MMBtu) per day by late 2015. Williams, which received interest for the expansion from shippers in a recent non-binding open season, will begin the pre-filing process with the Federal Energy Regulatory Commission in early 2013. The expansion would serve the needs of gas distributors and power generators on the East Coast.
- Tennessee Gas Pipeline recently announced a binding open season (when the pipeline obtains firm commitments for capacity from shippers) for its proposed Rose Lake Expansion Project, located in its Zone 4 area in Pennsylvania.
- The project will add 230 million cubic feet per day of capacity. The entire system, which has about 13,900 miles of pipelines from the Gulf Coast, has existing capacity of 6.9 billion cubic feet (Bcf) per day.
(For the Week Ending Wednesday, August 1, 2012)
- Natural gas prices declined for the report week (Wednesday to Wednesday) at many of the country’s trading locations, although a few points in the Northeast defied the trend. Algonquin Citygate (for delivery to Boston) began the week at $3.97 per MMBtu and rose to $4.24 per MMBtu yesterday, while the Henry Hub price closed at $2.96 per MMBtu, down 24 cents for the week.
- The natural gas futures market sank a bit week-over-week. At the New York Mercantile Exchange (NYMEX), the September 2012 natural gas contract fell 23.8 cents per MMBtu to close at $2.933 per MMBtu yesterday.
- Working natural gas in storage rose last week to 3,241 Bcf as of Friday, August 3, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 24 Bcf for the week moved storage levels 465 Bcf above year-ago levels.
- The Baker Hughes Incorporated natural gas rotary rig count declined by 7 to 498 active units on the week ending August 3. The oil-directed rig count increased by 13 to 1,429 units.