There was no more clarity on Friday about when service might be restored on Columbia Gas Transmission LLC’s (TCO) Leach XPress line after an early morning explosion near Moundsville, WV, on Thursday forced the operator to cut capacity to zero, which is stirring up the Appalachian spot market.
The Leach XPress expansion came online earlier this year to move 1.5 Bcf/d primarily to the Southeast and Gulf Coast. Nearly all of that was impacted by the explosion and fire, prompting reroutes and exacerbating regional takeaway constraints. Tudor, Pickering, Holt & Co. noted that weak basis indicates “supply appears to be backing up” in the basin.
Volatility was evident as Dominion South and TETCO M3 plunged on Thursday while Columbia Gas unsurprisingly gained more than a dime. But other hubs were down noticeably as the Appalachian Regional Average settled 17 cents lower on the day to finish at $2.21/MMBtu, according to NGI data.
The same was true Friday with Dominion South making no gains and TETCO M3 giving up seven cents. Columbia Gas fell three cents to finish at $2.74 and the Appalachian average declined by another penny.
“This is clearly a reaction to the explosion as export capacity out of the Mid-Atlantic region has been cut substantially,” Genscape Inc. analyst Vanessa Witte told NGI. “While some production will be shut-in, most of the gas will be rerouted from TCO onto other pipes. This means that export capacity out of the region will be more fully utilized and could lead to the region once again feeling constrained with respect to export capacity.”
She added that the impact to forward prices in the region is harder to predict and going “to be based on any guidance TCO provides as to when repairs will be complete.”
A force majeure remains in effect until further notice, TCO said in an update to shippers on Friday that included little new details. No injuries or property damage were reported, but several acres of land were scorched and a massive fireball was visible in footage posted online. The fire was extinguished after crews shut off the flow of gas.
It’s unclear what caused the explosion on the Leach Line 100, or even how much of it was damaged. The U.S. Pipeline and Hazardous Materials Safety Administration is investigating. Spokesman Darius Kirkwood said TCO has up to 30 days to submit an incident report, at which point more details will be available.
Day/day production from the southern part of the basin dropped about 120 MMcf/d on Thursday, Witte and other analysts said, while flows on the Columbia Gulf Transmission system were down by about 500 MMcf/d.
While the gas on Leach XPress is being rerouted, analyst Jake Fells of BTU Analytics LLC said producer margins could be hurt if service delays persist and keep gas flowing to the Midwest and other points that are less lucrative than markets in the Gulf closer to Henry Hub. He added, however, that the production decline has so far been nominal.
For TransCanada Corp., which owns TCO, it’s still too early to say what exactly the impact might be, TPH said in a note to clients on Friday.
“Force majeure events result in minimal cash flow impact to pipeline operators as make-whole provisions for customers’ volumes may be utilized once the pipe is up and running.”