Long-suffering Rockies producers are seeing the light at the end of the basis tunnel as the landmark Rockies Express Pipeline LLC (REX) wends its way eastward. But what the industry has yet to open its eyes to is the trouble brewing down South, says an industry analyst.

"There's a possibility that the Gulf of Mexico is going to experience its own little 'Rockies' problem," says Bentek Energy LLC CEO Porter Bennett. "You've got a whole bunch of new gas coming in via the different pipelines. Production is increasing very strongly in East Texas, Fort Worth, Arkla and Arkoma. You've got all these new pipelines bringing it to Perryville [LA]."

In a forthcoming study, Bentek looks at the Gulf Coast region, which it defines roughly as the northern edge of Arkansas down to Houston and out to the Gulf and across to the eastern edge of Louisiana. "The problem is that the ability to get gas out of that region hasn't expanded," Bennett told NGI, noting that on peak days the legacy pipelines out of the Gulf Coast run 90-95% full.

Additionally, what's good for the Rockies won't be good for the Gulf. Bentek projects that REX will push one-half to a full Bcf of supply back to the Gulf unless it's heavily discounted. "There's an export capacity problem, which is the same thing we've had in the Rockies."

The capacity crimp will be rearing its head as regional gas supply booms. Bennett says many in the industry aren't fully aware of how much production is ramping up from sources such as the Fort Worth Basin's Barnett Shale as well as the Gulf's Independence Hub.

For instance, the volume of gas moving east out of Texas on CenterPoint Energy's Carthage-to-Perryville pipeline was averaging 1.4 Bcf/d last month, compared with 0.3 Bcf/d for the same period in 2006 (see NGI, Dec. 17, 2007). Additionally, Gulf South Pipeline Co. LP will soon be placing into service its East Texas-to-Mississippi expansion project (see related story). Southern Union Co.'s Trunkline Gas Co. has completed also its Field Zone Expansion project, adding 625 MMcf/d of capacity to Trunkline's system out of Texas and increased delivery to the Henry Hub (see related story). And Cheniere Energy liquefied natural gas (LNG) and pipeline plans are moving forward in the Gulf (see related story).

"I don't think people fully appreciate the magnitude of what's scheduled to be developed out there [in the Gulf]," Bennett says. "A second part of it is I think people were real focused on getting more East Texas gas to the Gulf where they just assumed you could take it away from there, and because of the way the market is, it seemed like you ought to be able to. But the reality is [the pipeline capacity] is not there."

Also not to be overlooked is U.S.-bound LNG that will be landing in the Gulf.

"There's about seven and a half Bcf/d of incremental LNG capacity that's going to come on in the next year," Bennett says. "I don't think that the prices are going to support a regular stream of boats coming to the Gulf, but there are going to be days when there's not an ability to drop that gas in Europe, just like there was this spring. When that happens those boats are going to come in and land in the Gulf and just gonna beat the hell out of the price down there. You can put [the gas] in storage; the problem is on a peak day in the winter you can't get it out of storage."

It remains to be seen when Gulf region constraints will really be felt. Bennett noted on Friday that there was a 30-cent differential between Rockies prices and the Gulf. "Now a lot of that's Rockies gas going up; some of that's the Gulf not going up as much as it normally would have."

If the rest of winter is cold and storage is drawn down, the hard times in the Gulf could very well be postponed for a year, Bennett says. "It's not clear when it's going to manifest itself, but if you just look at the raw numbers, there's clearly a problem."

It might not be crazy to consider a new long-haul pipeline to carry gas out of the Gulf Coast region, but it's too early to be planning such a pipe.

"I don't think it's realistic right now because nobody really knows how this is going to play out," Bennett says. "If LNG doesn't come, then this isn't probably much of an issue. If we have a political change in a year and all of a sudden producers have a lot of disincentive to drill and explore, we could be right back where we were in 2000 in a couple of years. There are a lot of issues that are going to play out before you're going to know whether another pipeline is needed."

The Bentek report, to be titled "'I' of the Storm," is to be published in about a month.

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