Costly natural gas pipeline delays in the Northeast have generated “a lot more interest” in DTE Energy’s pipeline platforms to move volumes from the Appalachian Basin, management said Wednesday.
Speaking on a call to discuss second quarter earnings, newly tapped CEO Jerry Norcia said Appalachia production is seeing roughly 13% year/year growth. While producer activity is expected to result in some slowdown, to the tune of 5-6%, according to the company chief, “we're still of the view that this basin goes short pipe capacity over the next year or two.”
Norcia is not alone. RBN Energy LLC expects volumes to grow by another 8 Bcf/d over the next five years, with constraints once again rearing their ugly heads in the next three years.
A slew of pipeline projects, including greenfield projects, expansions and reversals, have come online in the Northeast and upper Midcontinent to balance supply and demand in the region. Last year, Rover Pipeline, DTE’s Nexus Gas Transmission system and the Atlantic Sunrise expansion -- all with more than 1 Bcf/d of capacity -- entered service.
For now, there is currently an average of 4 Bcf/d of unused exit capacity in the basin, according to RBN. But the delay in gaining federal approval for proposed projects like Atlantic Coast Pipeline or Mountain Valley Pipeline has created uncertainty about whether that infrastructure will ultimately get built.
“That's going to play, in our opinion, very favorably as our assets are positioned to take advantage of that, especially Nexus,” Norcia said.
DTE is no stranger to regulatory hurdles. Nexus, previously slated to enter service in November 2017, experienced a significant delay due to last year’s quorumless stretch at the Federal Energy Regulatory Commission after the project was left out of a series of last-minute Commission decrees prior to the departure of former Chairman Norman Bay.
Meanwhile, work is also progressing on the $250 million expansion of DTE’s Link Lateral and Gathering system in northern West Virginia and southwestern Pennsylvania. The company is also monitoring the move by some midstreamers to sell off some of their assets.
“The market is starting to bring a lot of opportunities forward as we see some midstream companies under severe stress from a balance sheet perspective, as well as we see producers redirecting capital…,” Chairman Gerard Anderson said. “We're starting to see opportunities kind of float our way, and we're being very selective and very disciplined about how we look at those.”
DTE reported second quarter 2019 earnings of $182 million (99 cents/share), down from $234 million ($1.29) in 2Q2018. The company increased its 2019 operating earnings/share guidance to $6.02-6.38 from $5.97-6.33.