Permian NatGas Increasingly Competes with M-U in Midwest

The biggest oil play in the United States is the Permian, located in West Texas and southeastern New Mexico. In March, MDN warned readers that natural gas in the Permian, which is a byproduct of the oil wells drilled there (i.e. “associated gas”), is increasingly competing with Marcellus/Utica gas (see “Free” NatGas in Texas Permian Changes Shale Gas Economics in M-U). A few weeks later we shared a Bloomberg article in which we learned the price of natgas in the Permian at major trading hubs is now lower than the price for hubs around the Marcellus/Utica (see Natural Gas Prices in Texas Permian Drop Below Marcellus/Utica). Our narrative continues with insights from the experts at RBN Energy. In a recent blog post, RBN looks at the three markets where Permian gas can flow out of the basin: “west to Arizona and California, south to Mexico and north to the Midcontinent and Midwest gas markets.” The route north to the Midwest is now being pursued by Permian gas, and that gas is competing with Marcellus/Utica gas molecules that travel to the Midwest via the Rockies Express and Rover pipelines…
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ME1 Pipeline Shutdown in M-U Causing Propane Prices in TX to Drop

Propane is one of the NGLs (natural gas liquids) that come out of the ground along with natural gas and oil–especially in “wet gas” areas like southwestern PA, eastern OH, and the northern panhandle area of WV. Ethane and propane have been flowing through the converted Mariner East 1 (ME1) pipeline for more than year–hauling propane (and ethane) from southwest PA all the way to the Marcus Hook refinery near Philadelphia. At Marcus Hook, the propane is loaded onto ships and sent around the world. The world is an important market for our propane. However, ME1 was suddenly switched off on March 3 by order of the Pennsylvania Public Utility Commission (PUC) after a sinkhole opened up under the pipeline, exposing some of the bare steel to the open air (see PA PUC Shuts Down Mariner 1 Pipeline Due to Mariner 2 Sinkhole). Sunoco Logistics Partners, the owner of ME1, is building a new set of pipelines called Mariner East 2 (ME2) close to the existing ME1. ME2 will also haul ethane and propane to Marcus Hook, greatly expanding capacity. As part of their construction work in Chester County, several sinkholes developed leading to the shutdown of ME1. You might think if the supply of propane suddenly stops, prices would go up. But that’s not what happened. Because the propane ME1 was hauling to Marcus Hook was exported, that supply is now staying here at home. The effect has been to drive DOWN the cost of propane–in Texas!…
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Natural Gas Prices in Texas Permian Drop Below Marcellus/Utica

The biggest oil play in the United States is the Permian, located in West Texas and southeastern New Mexico. Two weeks ago MDN warned readers that natural gas in the Permian, which is a byproduct of the oil wells drilled there, is increasingly competing with Marcellus/Utica gas (see “Free” NatGas in Texas Permian Changes Shale Gas Economics in M-U). The coming clash continues to grow. In a Bloomberg article published yesterday, we learn that the price of natgas in the Permian at major trading hubs is now lower than the price for hubs around the Marcellus/Utica, which is truly a first! We also get an ominous prediction from an analyst who watches these things, who said in the next three to four weeks, “natural gas prices in the Permian can go to zero because it’s literally a byproduct.” Free gas! As we pointed out in our previous post on Permian and gas prices, oil drillers can actually pay up to $2.36 per thousand cubic feet to dispose of the natgas coming out of Permian oil wells. That is, they can pay people to take the gas–as a cost of extracting the oil. Roughly one-third of the hydrocarbons coming from Permian wells is natgas. The biggest problem in the Permian for natgas is also the biggest problem in the M-U: lack of pipelines…
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Clash of the Titans: PA Marcellus Gas Competes with TX Permian

Last week MDN editor Jim Willis attended Hart Energy’s Marcellus-Utica Midstream conference in Pittsburgh (a series of stories are coming this week from that event). One of the stray comments Jim heard at the event was this: The chief rival or competitor to the Marcellus with respect to natural gas production is not, as you might assume (we sure did) the Haynesville Shale in Louisiana. No. The chief competitor, producing more and more volumes of natgas, is…the Permian! That’s right, an oil play! Why? When you drill for oil, you get other hydrocarbons out of the ground along with the oil. Primarily methane, or natural gas. It’s called “associated gas.” Even though most of what comes out of a Permian well is oil and not gas, because there are so darned many oil wells in the Permian (with more being drilled all the time), the total volume of gas coming from the Permian is going up, dramatically. The problem is, some Marcellus/Utica gas heads to the Gulf Coast to be used by petrochemical companies or to be exported. However, gas produced right there in the region is less expensive to get to market (shorter distance), so that Permian-sourced gas is competing, and increasingly crowding out, Marcellus/Utica gas. Investors have noticed and have, in a sense, “punished” some of the biggest of the big Marcellus/Utica producers by selling their shares, leading to a loss in share value. Among the hardest hit have been Southwestern Energy, Gulfport Energy, and Range Resources. The stock price for those three companies is down, since Jan. 1st, 33%, 30% and 25% respectively. A Bloomberg article says the stocks for those companies have been “mauled.” Indeed. Here’s some insight into how the Marcellus/Utica is increasingly going up against the oil giant Permian Basin, sometimes getting mauled…
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Gov. Cuomo Triples Upstate NY Electric Bills by Blocking Natgas

This is a somewhat personal story that perfectly illustrates the point we’ve been making for years. MDN editor Jim Willis lives with his wife and family in the Binghamton, NY area. Jim likes to say he “lives behind enemy lines”–meaning New York State under Andrew Cuomo and his radical left base are hostile to the fossil fuel industry. The cost of Cuomo’s actions for every New Yorker (at least those of us living in Upstate) is now on full display for all to see. A few weeks ago Jim got his monthly electric bill from New York State Electric & Gas (NYSEG, owned by the Spanish company Iberdrola). Jim’s eyes about fell out of their sockets. Jim largely uses electricity for heating (with a fuel oil furnace as backup). No natural gas lines where Jim lives, unfortunately. Even in the dead of winter Jim’s electric bill is rarely over $200 in any given month–typically around $150. This time? Nearly $700!!!! At first, Jim chalked it up to the cold snap and the constant running of his electric heat source. Then he spotted an article (below, sent to us by Vic Furman), that shows Jim is not the only one. Across the entire region folks received bills that are double and triple the usual amount. Why the spike in price? It seems the lack of natural gas via pipelines is not only hurting New England, it’s now hurting Upstate NY. Due to a lack of natgas supplies and the huge regional demand for natgas–for home heating as well as for electric generators–the spot price for gas went through the roof and along with it NYSEG’s cost for both natgas and electricity generated by natgas also went through the roof. Consequently, Cuomo’s frack ban and (now) pipeline ban on importing natgas from PA are having very real, tangible consequences–in our electric bills. All of Cuomo’s precious renewable sources of energy will not, indeed cannot, make up for a lack of natgas. Cuomo’s stupidity is costing ME real money…
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EIA Predicts Natural Gas Prices in 2018 & 2019 Will be “Flat”

The price of natural gas is a complicated subject. First, “the price” is never just “the price.” Many people look to the NYMEX or Henry Hub spot price as “the price.” Indeed, most of the financial contracts for natural gas are based on the Henry Hub price. However, as we’ve written many times over the years, gas is bought and sold at hundreds of points along major interstate natural gas pipelines. The price at one place on a pipeline, like the Tennessee Gas Pipeline Zone 4 in northeastern Pennsylvania, is vastly different from the Henry Hub. Price is dependent on many factors–supply and demand to be sure. But also weather. Weather is probably the biggest influencer of natgas prices. Why? The warmer (or colder) it is, the more natural gas is used to cool or heat homes and businesses. The more demand, the higher the price. Conversely, the less demand, the lower the price. Henry Hub is a useful yardstick and the most-watched natural gas price in the world. Our favorite government agency, the U.S. Energy Information Administration, recently published their Short-Term Energy Outlook (STEO). In the STEO, EIA predicts the price of natural gas at Henry Hub will remain relatively flat both this year and next year. This year (2018), EIA says the average price of gas at Henry Hub will be $2.88 per thousand cubic feet (Mcf). Next year? EIA says the price will average $2.92/Mcf. The average price of gas at Henry Hub for all of 2017 was $2.99/Mcf. Bottom line: The price of gas is a bit depressing for gas drillers for the foreseeable future. Here’s EIA’s reasoning…
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Get Tomorrow’s Marcellus/Utica NatGas Prices Today!

Anyone with even a passing interest in the natural gas market–either the Marcellus/Utica or elsewhere–knows there is one dominant factor that drives exploration and production: PRICE. The price of natural gas is the tail that wags the entire natgas dog. Low price? Less (or no) drilling, shut-in wells, less leasing–everything is less. High price? Pop the cork on the champagne bottle! When the price goes up and stays up, drillers begin seismic surveys, then leasing, then permits, then drilling. After drilling comes pipelines–both to the well and to market. And businesses tend to gather around points where there is access to natgas (and its byproducts). It’s a virtuous cycle, from upstream (drilling) to midstream (pipelines) to downstream (end users of the gas)–that all starts with price. Who should have an interest in price? Everybody! However, there are some whose jobs and livelihoods depend on price–gas traders, industrial buyers, drillers who need to sell their gas, etc. Those people need a daily update on the price. Who do they turn to? There are several price reporting authorities that monitor trade information for natural gas trading. There is no single price for natural gas–there are hundreds of prices. Gas is traded at trading hubs or points along major pipelines across the country. Each time a trade is done (price requested, price offered or “ask” and “bid”), that valuable information gets recorded and sent to a price recording authority. Each day around 1:30 PM Central Time, NGI gathers up trade information for THAT DAY, trades that have occurred so far at trading points all over the US and Canada, and posts/emails the information to subscribers. It is like getting tomorrow’s prices–the prices everyone else will base their trades on–today! How can you get tomorrow’s prices today? Glad you asked. Request a trial to NGI’s MidDay Price Alert here. Below we have a section of a recent edition showing prices in Appalachia (the Marcellus/Utica), and for the entire northeast…
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Another 3 Bcf/d of Pipeline Takeaway Coming to M-U by March 31

In the fourth quarter of 2017 (Oct-Dec), 2.3 billion cubic feet per day (Bcf/d) of new/extra pipeline capacity was added in the Marcellus/Utica region, to carry our gas to markets outside the region. Even though production in the Marcellus/Utica has continued to climb every single month, that 2.3 Bcf/d of extra “takeaway” capacity had an immediate effect–prices for our gas began to rise. Here’s a bit of exciting news: By the end of the first quarter this year (that is, by Mar. 31st), another 3 Bcf/d of pipeline takeaway capacity will be online. We expect this new takeaway, combined with last quarter’s increase in takeaway, will continue to drive prices for our gas higher…
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Ultra-Lib Boston Globe Now Admits New England Needs New Pipes

In the end, even the ultra-liberal editors of the Boston Globe couldn’t ignore and deny reality–the reality that their own favorite sons and daughters are to blame for sky high energy prices and dirtier air, because they’ve fought against new natural gas pipelines. We’ve been blowing the horn that New England is getting hosed on energy prices, paying the highest average prices in the world for natural gas, because of their stubborn refusal to allow new Marcellus gas pipelines into the region (see New England’s Lack of Pipelines = Most Expensive Gas in the WORLD). And now, even the ultra libs are admitting it. Here’s what the Boston Globe says “went wrong” and why the region is experiencing more air pollution this winter…
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NatGas Trading in NYC Hits $175/Mcf – Highest Ever Recorded!

Click chart for larger version

Brrrr! If you live anywhere in the northeastern part of the country, you’re likely bundled up sitting at home, or bundled up sitting at work. Most schools dismissed today because of the brutally low wind chill values–minus 30 degrees Fahrenheit in upstate NY where MDN is headquartered. Over the past couple of days MDN has highlighted the news that with this latest winter ‘bomb cyclone’ as it’s called, the lack of natural gas pipelines to New England–to feed both homeowners who heat with gas and utilities that use gas to generate electricity–can no longer be ignored. Two days ago we told you that New England now has the dubious distinction of paying the highest average price for natural gas in the entire world (see New England’s Lack of Pipelines = Most Expensive Gas in the WORLD). Yesterday we told you that at least part of the blame for New England’s sky high natgas prices can be laid at the feet of New York Gov. Andrew Cuomo (see New England Can “Thank” NY Gov. Cuomo for Sky High NatGas Prices). However, lack of pipelines doesn’t only affect New England states, it also affects New York itself. Yesterday history was made when the spot price for natural gas in New York City hit an amazing $175 per thousand cubic feet (Mcf) at the Transco Zone 6 New York trading hub. Incredible! In Boston, at the Algonquin City Gate trading hub, the spot price briefly hit $105/Mcf! Below we have the news about these record-breaking prices from the natgas price experts–Natural Gas Intelligence (NGI). Each weekday NGI publishes their MidDay Price Alert by 1 pm Central, both emailed and available at this webpage: www.naturalgasintel.com/middayprices. The MidDay Price Alert, which includes Intercontinental Exchange trade data, gives gas traders (and those with a keen interest in prices) the latest intel on what’s happening with prices at 125+ trading hubs across the country. Here’s what yesterday’s MidDay Price Alert showed for trading in the northeast… Continue reading

New England Can “Thank” NY Gov. Cuomo for Sky High NatGas Prices

As we pointed out earlier this week, New England now has the dubious distinction of paying the highest prices for natural gas–in the world (see New England’s Lack of Pipelines = Most Expensive Gas in the WORLD). The recent cold snap, which continues, has made natgas in New England about as valuable as gold. As we pointed out in our post, New Englander’s have nobody to blame but themselves and their uber-liberal, lefty, know-nothing leaders. Except maybe there is someone else who shares at least some of the blame–New York’s corrupt Democrat governor, Andrew Cuomo. Cuomo not only banned fracking (which screws all New Yorkers), he’s also blocked important pipeline projects through NY that would connect Marcellus gas supplies to New England (screwing New Englanders). So New Englanders can blame themselves AND blame Gov. Cuomo. Forbes writer David Blackmon does a masterful job in laying the blame where it belongs–at the feet of Prince Andrew…
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New England’s Lack of Pipelines = Most Expensive Gas in the WORLD

Baby it’s cold outside! This was predictable (and indeed, MDN did predict it). With the arrival of an extended cold period, because of a lack of natural gas pipeline capacity in New England, recent spot prices for natgas near Boston have spiked to more than $35 per thousand cubic feet (Mcf). It gives New England the dubious distinction of paying the highest average price for natural gas in the entire WORLD. The price for the same gas about 250 miles away in the Marcellus? Between $1-$2/Mcf. And yet the dunderheads in New England, like U.S. Sen. Elizabeth “Pocahontas” Warren, continue to block new pipelines in the region. “Stupid is as stupid does,” as Forrest Gump said. We hope our friends in New England enjoy paying through the nose and every other orifice they possess over the next few weeks, until the arctic blast subsides…
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How U.S. Shale Changed the World Geopolitcally

American shale has fundamentally transformed the world geopolitically. How? Just think about. #1 – Saudi Arabia and Iran are on the brink of all-out war. For decades Saudia Arabia has been the world’s leading oil producing country. Iran has been in the top five oil producing counties. #2 – Venezuela, the country with the world’s largest oil reserves, is rumored to have defaulted on its foreign debt. Either situation, #1 or #2, hint at the potential for the flow of oil to be disrupted. Both happening at the same time is an oil cataclysm. A decade ago such news would have resulted in oil hitting $100, perhaps even $150 per barrel. The price of gas at the pump would have soared, overnight, to more than $5/gallon. Yet what has happened to the price of oil with this recent geopolitical news? Nothing. If anything, the price has gone down! The only reason oil prices are not through the roof is because of the abundance of American shale oil. An occasional guest blogger here on MDN is Daniel Markind, a partner with law firm Weir & Partners. Dan recently sent along what we consider masterful insight into how shale energy has literally changed the world. As a bonus, Dan asks a probing and relevant question of those who want to stop the use of all fossil fuels…
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Pipeline Takeaway Capacity in M-U Ramps Up This Winter – Prices Too?

Source: RBN Energy – click for larger version

The experts at RBN Energy are back with another great article about pipelines in the Marcellus/Utica. This one takes a look at pipeline projects recently completed, and those that will get completed by March 2018. RBN says if you add them all together–the projects that were launched into service since last winter or will be online by the end of this winter, it amounts to a staggering 6.7 billion cubic feet per day of Marcellus/Utica gas flowing to other regions. Which regions? “Almost 3.0 Bcf/d of the incremental capacity versus last winter is designed to flow gas west from Ohio into the Midwest market; another 3.4 Bcf/d or so to the Gulf Coast via Ohio and the final 400 MMcf/d (from Atlantic Sunrise) to the Southeast via the Atlantic Coast.” The overall point of the article: natural gas prices nationally are going nowhere fast. At least, they aren’t going up any time soon. We are awash in new supplies of natural gas. Perhaps Marcellus/Utica prices will drift up a bit as the gas exits our region, but more likely prices in other regions will come down more than our prices will go up. That’s the upshot. Here’s the details…
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FERC Report Says Warm Winter Ahead, Gas Prod to Grow 5 Bcf/d

Last week the Federal Energy Regulatory Commission’s (FERC) Office of Enforcement (OE) released their 2017-18 Winter Energy Market Assessment, an annual look ahead to the coming winter. OE shares their thoughts and expectations about market preparedness, including an assessment of risks. What does the report show? OE says production is going up (increasing another 5 billion cubic feet per day by next April), natural gas in storage is “robust” (meaning high), and the upcoming winter weather looks to be warmer than normal in most of the country, including the northeast. Translation: Don’t expect the price of natural gas to spike this winter. Prices will remain relatively low. Here’s the full OE report (interesting reading, pretty charts)…
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Will New Pipes Coming Online Lift Marc/Utica Prices This Year?

With new pipelines coming online in the Marcellus/Utica, will the price of natural gas bought and sold at regional trading points, like Dominion South and TGP (Tennessee Gas Pipeline) Zone 4 go higher? It certainly makes sense that with more of our gas flowing out of the area, there will be less gas left in the area and therefore will fetch a higher price. In fact, just after Energy Transfer’s Rover Pipeline, now in partial service, began to flow, the price of gas at the Dominion South hub jumped 31% (see Rover Pipeline Triples Volume of Gas Flowing, Prices Go Up). However, the analysts at BTU Analytics are not convinced. BTU is running a complimentary webinar on Nov. 2 titled, “Northeast Pipes Have Arrived. Now What?” Ahead of that webinar they’ve posted a blog teasing some of their thinking. The bottom line from that post: “Will Rover or this year’s takeaway projects help uplift weak prices in the Northeast? We don’t think so.” Hmmmm. Looks like we’ll have to attend the webinar to find out all the reasons why they that so. In the meantime, BTU provides some helpful background in their blog…
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