As pipelines alleviate natural gas glut, prices rise for producers in Northeast
The growing network of pipelines from the Marcellus and Utica Shales means natural gas producers in the region are starting to earn more money for their product, according to an analysis from the U.S. Energy Information Administration.
Daily natural gas spot prices at three regional hubs in the Northeast are still below the Henry Hub national benchmark price in Louisiana. At the end of last month, for example, the natural gas price at Dominion South, a trading at a hub near Pittsburgh, was at $1.85 per million British thermal units, which is about $1.00 lower than the Henry Hub price, but the difference has been narrowing, says the EIA.
The driver of the disparity has been the Northeast’s pipeline infrastructure, which has not kept pace with soaring natural gas production. The industry has long said these pipeline projects are needed alleviate the bottleneck, so gas can reach new customers within the U.S. and abroad. While the Henry Hub price serves as a national benchmark, Appalachian producers often complain they were receiving far less, due to the regional oversupply.
David Spigelmyer, president of the gas trade group, the Marcellus Shale Coalition, praised the recent progress in developing pipeline infrastructure, which he says helps supply power plants, manufactures, and consumers.
“There’s still a great deal of work ahead to fully realize these benefits and to further close the basin’s longstanding pricing gap,” Spigelmyer writes in an email. “However regulatory challenges all too often holding up these critical projects, which our local workforce is ready to develop.”
Last year 11 interstate pipeline projects were completed in the Northeastern U.S., which added slightly over 4 billion cubic feet per day of capacity, according to EIA. Pipeline builders are still urging the approval of new projects. Particularly now that new commissioners have been appointed to the Federal Energy Regulatory Commission, which was hamstrung without a quorum since February.
According to the EIA, in the first half of this year, the difference between prices at the Henry Hub in Louisiana and at Dominion South shrank and averaged, ” $0.53/MMBtu, about two-thirds the average difference of $0.76/MMBtu during the first seven months of 2016.” The agency says other price points in the Appalachian region have followed similar trends.