?The introduction of new pipeline capacity from the Rockies and from shale-basin gas will be the first step toward a “truly national natural gas market,” reports Rehan Rashid, an analyst with Arlington, Virginia-based Friedman, Billings, Ramsey & Co. Inc.
The bulk of incremental supply growth is expected to come from four major Midcontinent, East Texas and northwestern Louisiana shale basins: the Barnett, Woodford, Fayetteville and Haynesville.
“We estimate that 16 major pipeline projects have been announced that are designed to move natural gas from these basins to major market centers,” he says. True incremental take-away capacity from the shale basins will be 3.5 billion cubic feet (Bcf) per day by third-quarter 2009, he says, and grow to 7.3 Bcf in 2009 and 9.1 Bcf in 2010.
“The new pipeline projects will make demand centers in the U.S. Southeast, Northeast and Midwest accessible.”
The current lack of pipeline infrastructure, primarily from Midcontinent and Rockies gas production, has created a disconnect between the major producing and consuming regions. As a result, the gas market in the U.S. has been regionalized, and large fluctuations between spot prices in various geographic regions exist. The new infrastructure build-out will connect Midcontinent, Southern U.S. and Rockies production and is the first major step toward creating a national gas market.
Rockies Express East is scheduled to open in July 2009 to trans?port 1.8 Bcf per day to Lebanon, Ohio, eventually terminating in eastern Ohio. Several projects have been proposed to build Rex East further, allowing Rockies gas to penetrate the U.S. Northeast market.
Gas demand in the U.S. Southeast, Northeast and Midwest has not grown substantially since 2001, he reports. Combined demand for the three regions was 27 Bcf per day in 2001, compared with 29.6 Bcf in 2007. The majority of demand growth is in the U.S. Southeast. The U.S. Northeast consumed 13 Bcf per day in 2007, resulting in a compounded annual growth rate of 1.3% since 2001.
“We believe that the historical 1.3% CAGR—let alone any slowdown in the CAGR—will not be enough to keep pace with the introduction of new supply from shale basins and Rockies production. Exacerbating the oversupply problem will be, we believe, the growth of natural gas production from Appalachia, particularly the Marcellus shale, which should effectively strand new gas production in the Northeast region,” he says.
Recommended Reading
Activist Elliott Builds Stake in Oil Major BP, Source Says
2025-02-10 - U.S.-based Elliott is seeking to boost shareholder value by urging BP to consider transformative measures, Bloomberg News reported Feb. 8.
Utica Liftoff: Infinity Natural Resources’ Shares Jump 10% in IPO
2025-01-31 - Infinity Natural Resources CEO Zack Arnold told Hart Energy the newly IPO’ed company will stick with Ohio oil, Marcellus Shale gas.
Pearl Energy Investments Closes Fund IV with $999.9MM
2025-02-04 - Pearl Energy Investments’ Fund IV met its hard cap within four months of launching and closed on Jan. 31.
Magnolia’s Board Adds Ropp as Independent Director
2025-01-07 - Alongside his experience in oil and gas operations, R. Lewis Ropp has a background in finance, capital markets and investment management, Magnolia Oil & Gas said.
Buying Time: Continuation Funds Easing Private Equity Exits
2025-01-31 - An emerging option to extend portfolio company deadlines is gaining momentum, eclipsing go-public strategies or M&A.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.