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Bentek: REX Giveth and Taketh

As predicted, the near completion of Rockies Express Pipeline (REX) is delivering both pain and gain to gas supply basins, Bentek Energy LLC has found.

For a pipeline that doesn't go anywhere near Erath, LA, home of the Henry Hub, REX is having a lot of influence on the nation's gas price benchmark. Since REX-East began delivering gas to Lebanon, OH, late in June some supplies from the Southeast/Gulf Coast are being priced out of the Ohio market, Bentek said.

"In effect, the Ohio market has determined that it will not need all of the supply previously flowing north from the Southeast/Gulf along with new supply from the Rockies until the winter heating season begins," Bentek analysts wrote in a recent market alert. "This in turn is putting downward pressure on Southeast/Gulf region prices, which is having a direct impact on the nation's benchmark pricing location, the Henry Hub."

What the analysis firm prophesied earlier this year with the completion of REX to Ohio (see NGI, Jan. 19) has come to pass. Lebanon is now where the various regional gas molecules duke it out. There is only 104 MMcf/d of open capacity to take gas away from the Lebanon hub, Bentek noted.

"This means that most of the 730 MMcf/d of gas flowing to Lebanon on REX-East has to displace other supply," the analysts wrote. "As Northeast demand increases and prices rise, the competition between REX and other traditional supply sources at Lebanon is expected to become even more intense."

Bentek said these trends will continue as REX-East makes its way into Clarington, OH, in November.

The influence of REX gas is being felt in the Midcontinent as well, but in a positive way for producers there. REX has shifted gas flows eastward, opening the Midwest market to more Midcontinent supply, "putting upward pressure on Midcontinent producing area prices," Bentek found. Regional basis in the Midcontinent was up 50 cents in July compared with June and 64 cents compared with year-to-date levels through the end of June. "Basis has made gains at all of the Midcontinent locations," the analysts wrote.

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