A wave of new gas pipeline capacity is set to come online in the Northeast US before the end of 2017, but current drilling and output in the area suggests that producers are unlikely to meet transportation obligations. Luke Jackson evaluates the Rover, TCO Leach Xpress and TETCO Adair/Southwest/Lebanon projects and the chances that they will fill with new supply — before even more pipeline capacity is expected in the area in 2018 and 2019.
Video Transcript
New Northeast US gas pipelines will be hard to fill: Platts Analytics
By Luke Jackson, senior energy analyst
Welcome to The Snapshot, a series examining the forces shaping and driving global commodities markets today.
The biggest question in the Northeast US natural gas market as a wave of new pipeline capacity is set to come online before year's end is whether or not these new expansions will fill up with new production and how many more rigs are actually needed to achieve this.
Historically, when new pipelines came online, Northeast production increased to fill those expansions. However, going forward, Platts Analytics does not expect this to be the case.
In a recent Spotlight post, Platts Analytics discussed the level of drilling activity needed to fill the 5 Bcf/d of new pipeline capacity from the Rover, TCO Leach Xpress and TETCO Adair/Southwest/Lebanon projects, which are poised for late 2017 in-service dates.
Roughly 45 additional rigs in Ohio, southwest Pennsylvania, West Virginia would be needed to fill capacity by December 2017
In short, roughly 45 additional rigs on top of the current 50 rigs running in the Ohio, Southwest Pennsylvania and West Virginia region would be needed to fill this capacity by December 2017.
But a more interesting question is: how much would it take for individual producers to fill their respective transport?
Antero, Range and Ascent are three producers are contracted for a combined 3.2 Bcf/d of the 5.3 Bcf/d of expansion capacity due online in 2017.
Antero, Range, Ascent unlikely to fill transportation obligations by December 2017, based on current drilling pace, production profiles
Based off each company's current pace of drilling and respective production profiles, all three operators are unlikely to fill their transportation obligations by December 2017. However, filling their transport by December 2018 is feasible. Antero is best positioned to fill its 0.8 Bcf/d commitment on Rover with new production by December 2018 if it completes 1.5 times more wells than it is completing currently.
However, Ascent and Range, would need to double and triple their current pace of well completions to fill their capacity obligations by December 2018.
Pipeline projects coming online this year in Northeast US will likely take until December 2018 to approach full capacity: analysis
This analysis suggests new pipeline projects coming online this year will not fill with new supply imminently, but rather, will likely take at least until December 2018 before approaching full capacity unless there is a reshuffling of gas from existing pipelines to the new capacity.
But even more capacity will arrive online in the Northeast in 2018 and 2019. This new capacity will be nearly impossible to fill, barring a massive ramp in drilling activity, which, per our forecast, is not expected to occur.
This changing Northeast narrative is very bullish for Northeast gas prices, which will be welcome news for Northeast producers who have been living in a sub $2/MMBtu world the past two years.
Until next time on the Snapshot — we’ll be keeping an eye on the markets.