Slowdown in pipeline builds to cut Marcellus gas output growth: report
Houston (Platts)--29Nov2012/403 pm EST/2103 GMT
A slowdown in the construction of pipelines will lead to lower natural
gas production growth in some parts of the Marcellus Shale and could lead to
higher gas prices next year as supply from higher-priced regions makes up
some of the shortfall, investment bank FBR Capital Markets said in a
The growth in Marcellus production will slow to 1.3 Bcf/d over the next
12 months from a rate of 2.3 Bcf/d during the past 12 months as many of the
projects aimed at boosting take-away capacity in the region are not expected
to enter service until the fourth quarter of 2013, FBR said.
Production from the Northeast Marcellus rise by estimated 60% to nearly
4.9 Bcf/d during the fourth quarter 2012 from 3.1 Bcf/d in the fourth quarter
2011, according to FBR. With 3.9 Bcf/d of pipeline capacity additions planned
for the Northeast market through 2016, the bank said it expects future growth
to mirror planned pipeline take-away capacity expansion.
"We estimate that about 0.5 Bcf/d of capacity will be added early next
year as the Williams gathering system comes on line," FBR said in the report.
Williams is laying a gathering system from the Wyoming/Susquehanna
County area in Pennsylvania to Iroquois zone 2, effectively boosting
take-away capacity by about 500,000 Mcf/d in the first half of 2013.
"The next big increase in capacity is not expected until late Q4 2013 as
four different projects come on line to add 1.4 Bcf/d in Q4 2013," the report
said. "As such, after the nearly 60% increase since Q4 2011, we expect
[Northeast] Marcellus area production to grow only an additional 18% through
Q4 2013, with a cumulative growth of 43% to 7 Bcf/d through Q4 2014."
The supply deficit could boost gas prices to an average US gas prices to
$4.50/MMBtu for 2013 and beyond as other higher-cost supply like the
Haynesville step in to respond to lower supply, FBR said.
Meanwhile, in the Southwest Marcellus, production is estimated to grow
40% to 2.2 Bcf/d during the fourth quarter 2012 from 1.6 Bcf/d during the
same quarter last year, FBR said. The bank expects production will grow an
additional 28% to 2.8 Bcf/d by the fourth quarter 2013.
The production growth comes as some 2.4 Bcf/d of pipeline takeaway
capacity additions are planned for the Southwest market through 2016, the
report said. In addition, 4 Bcf/d of processing capacity is expected to be
added in the next two to three years, it said.
Looking ahead, FBR said it expects some 12,681 MW of new generation will
be added in the region by 2016, adding some 1.3 Bcf/d to gas demand.
Futher, FBR said Marcellus production -- which it estimates could reach
18 Bcf/d by 2020 -- could push the Northeast to become a net exporter of
supplies as early as the shoulder months of next year.
"With current average Northeast demand of 12 Bcf/d, and a range of 9
Bcf/d in the shoulder months and 17 Bcf/d in the winter months, we expect the
Northeast to be a net exporter of gas into storage and other demand centers
starting the shoulder months of next year and attain full-year supply/demand
balance by 2015," FBR said, noting the net exportability and
self-sufficiency will have significant implications for realized prices for
Marcellus production, as well as realized prices throughout the US.
--Leticia Vasquez, firstname.lastname@example.org
--Edited by Jeff Barber, email@example.com