September natural gas pipeline flows into the Midwest have outpaced regional demand from residential, commercial, industrial and power generation combined, according to a Direct Energy executive.
Total demand month-to-date as of Sept. 10 averaged 9.1 Bcf/d, versus average flows of 12.3 Bcf/d over the same period in 2018, said market analysis manager Kiran Sidhu, who spoke at the recent LDC Gas Forums MidContinent conference in Chicago.
Demand has been relatively flat or lower year/year, expanding the gap between demand and increased supply from gas piped into the region. The ramp-up has been primarily from Energy Transfer LP’s 3.25 Bcf/d Rover Pipeline and Enbridge Energy Inc.’s 1.5 Bcf/d Nexus Pipeline, Sidhu said. Each pipeline brings gas produced in Appalachia to the Midwest.
Combined demand from residential, commercial and industrial has averaged 6.6 Bcf/d in September, down by 0.1 Bcf/d year/year and flat to five-year-average levels, Sidhu said. Power demand has averaged 2.5 Bcf/d, which is flat from a year ago but up by 0.8 Bcf/d from five-year averages.
The September average pipeline flows into the Midwest of 12.3 Bcf/d has risen by 0.65 Bcf/d year/year and 1.28 Bcf/d above the five-year average, he said. As a result of the supply/demand imbalance, gas is backhauled from the MichCon citygate pool, Sidhu said. “We’ve never seen that before.”
Rover and Nexus originate in Ohio, where they collect Appalachian shale gas, but the remainder of the year should see further increases in piped gas flows from the Bakken Shale as well, Sidhu said. Bakken interstate pipeline interconnects are expected to expand by roughly 400 MMcf/d in 2019, correlating with a roughly 450 MMcf/d expansion of gas processing capacity in the region.
Crestwood Equity Partners LP, for example, has already begun to ramp up its 120 MMcf/d Bear Den II natural gas liquids (NGL) processing plant in Watford City, ND, and should reach nameplate capacity by the end of this month.
The Bakken increases may affect Canada’s supply more than in the Midwest. “Incremental Bakken processing gas will push back Canadian imports one-for-one,” said Sidhu.
Despite the supply/demand imbalance, industrial demand could become an increasingly important part of bringing the market into balance, said IRI Columbia University Chairman Jim Duncan. At the conference, he cited 775 newly commissioned chemical plants in the Great Lakes region alone as evidence of the regional demand boost to come from the industrial sector.