Between now and the middle of next year 40 infrastructure projects in the Southeast/Gulf Coast region will shift natural gas flow patterns, disrupt regional pricing relationships and realign the value of transportation capacity across the most complex pipeline grid in North America, according to a new report from Bentek Energy LLC.
According to the analysis, there are 25 gas pipeline projects, 11 storage projects and four liquefied natural gas (LNG) terminals in the mix. Major gas industry players have projects in the Gulf Coast area under construction, including Boardwalk Pipeline Partners, CenterPoint Energy, Enbridge, Energy Transfer Partners, Enterprise Products Partners, Kinder Morgan, Plains All American Pipeline, Spectra Energy and others.
This level of industry infrastructure development has not been seen since the interstate construction boom of the late 1940s and early 1950s. A number of the projects are intended to tap into the unconventional Barnett, Woodford and Fayetteville shale plays and the Bossier Sands in East Texas and move gas to markets in the Southeast and Northeast.
In January Bentek CEO Porter Bennett gave NGI a preview of the report's findings during an interview (see NGI, Jan. 21).
"The pipeline and LNG projects represent a total of more than 25.4 Bcf/d of additional capacity serving the Southeast/Gulf region, with an additional 6.3 Bcf/d of new storage deliverability as well," said Bentek Managing Director Rusty Braziel. "But there's a catch: In the short term there will not be enough incremental supplies to fill the new pipeline and LNG terminal capacity."
The initial shortfall in incremental production entering the Southeast/Gulf will have significant implications for regional flows and pricing, Bentek said. Several of the new pipeline projects with more favorable cost and tariff structures will displace or "steal" gas from legacy pipelines that deliver gas into and across the region.
Also, the new pipelines will increase demand in the producing areas while increasing supplies in areas that typically enjoy premium pricing. This development is expected to narrow the price differential between shale and sands producing region and premium Southeast markets at Transco Zone 4, Texas Eastern M-1, FGT Zone 3 and Sonat Louisiana, the research and analysis firm stated.
Bentek also notes that four new LNG import terminals are scheduled to be completed in the Southeast/Gulf region within the next 16 months, adding 7.1 Bcf/d of high-deliverability sendout capacity to the Louisiana and Texas coast. "[T]here is little doubt that all four of these facilities will be completed, but there is considerable doubt regarding the frequency and delivery pattern of vessels that will show up at these facilities over the next few years," the firm said.
Braziel said Henry Hub will be "buffeted by successive waves of new capacity expansions, interspersed with supply increases and the occasional influx of LNG cargoes. As a result, the natural gas market will experience significant volatility in regional price differentials."
The report -- titled "I of the Storm" after the geographic shape of Bentek's Gulf region flow/capacity model -- is being published in three parts with the first addressing the outlook from now until June 2009. Conclusions of part one include:
Bentek said part two of its series will highlight anticipated developments during the last half of 2009 through 2010. "This report will concentrate on the impact of new storage facilities in the Southeast/Gulf and will assess the impact of the completion of the Rockies Express [pipeline] into the Ohio Valley region." Part three will extend the analysis beyond 2010 and consider the impact of LNG imports and the longer-term outlook for onshore and offshore gas production.
The firm also has launched a service called the Southeast/Gulf Observer to provide clients daily updates on market developments and weekly analysis.
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