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Williams Limits Transco Services in Marcellus

Williams on Thursday said it has restricted some natural gas pipeline services on its mainstay Transcontinental Gas Pipe Line LLC (aka Transco) because of capacity constraints in the Pennsylvania portion of the Marcellus Shale.

In a website posting, Transco said it was monitoring and restricting interruptible transportation, including secondary firm transportation, for services north of a constraint near Station 195 in southeastern Pennsylvania for deliveries south.

A lack of infrastructure has hindered the pipeline, which has the capacity to carry 9.9 Bcf/d to markets across the Northeast and Southeast. However, Transco said it can't accommodate gas transportation past the 195 station because receipts can't exceed deliveries north of it.

More reductions in transportation could be required on the Leidy line at Station 515 in Luzerne County, PA, to alleviate conditions, Transco said. Last month Transco ramped up the Palmerton Loop in Monroe County, PA, the first pipeline loop on its Northeast Supply Link extension to move gas out of the Marcellus (see Shale Daily, July 15).

Transco said it doesn't have facilities in place to accommodate physical movement of gas from north-to-south past the station because receipts cannot exceed deliveries north of Station 195. "Additional reductions of interruptible and secondary transportation may be required on the Leidy line at Station 515 to alleviate the condition."

Williams now is installing a 16,000 hp natural gas turbine-driven compressor unit at the Leidy station.

Williams late Wednesday issued its 2Q2013 results. It said steadily increasing gas volumes in the Northeast lifted Williams Partners LP to a new monthly average of 1.83 Bcf/d in June, with volumes between April and June jumping 76% year/year. However, the pipeline unit and majority owner Williams were slapped in the latest quarter by slumping natural gas liquids (NGL) margins, down sharply from a year ago.

Net income was higher year/year at $142 million (21 cents/share) from $132 million (also 21 cents). However, adjusted income came in at $129 million (19 cents), down slightly from a year ago, mostly because of NGL margins, down 44% year/year. The losses were offset by higher fee revenues and olefin margins from majority-owned Williams Partners LP.

NGL margins dropped to $105 million in 2Q2013 from $189 million in 2Q2012, and they were down 13% from 1Q2013's $121 million. Ethane equity sales plunged by 78% between April through June year/year to 37 million gallons from 166 million gallons. Per-unit ethane NGL margins/gallon fell 91% to 2 cents, versus 22 cents in both 2Q2012 and 1Q2013. Ex-ethane margins also declined by 29%.

Quarterly net income was higher from a year earlier "primarily due to an increase in fee revenues at Williams Partners," but it was "substantially offset by lower commodity margins," said CEO Alan Armstrong.

Williams' business units include the gas pipeline plum, as well as an NGL/petrochemical unit and a 50% stake in Access Midstream Partners LP, which reported its earnings earlier this week. Together the three units scored $456 million in profits in the latest period, versus $409 million a year ago. However, the earnings growth was all on Williams Partners, with $403 million in earnings versus $391 million. The NGL and petrochemical segment earned $22 million versus year-ago profits of $16 million, while the half-stake in Access garnered $29 million, flat year/year.

The pipeline partnership performed better between April and June, but in the first half of this year, profits fell to $859 million, from $942 million in the first six months of 2012. The decline in earnings in the first half resulted from a decline in NGL margins and higher operating costs, said Armstrong.

NGL margins suffered not only on prices, but on the incident at the Geismar Olefins plant in Louisiana, which had to be shuttered in June following an explosion in part of the facility (see Daily GPI, Aug. 1). Between January and March, Williams' NGL margins also were depressed, but higher olefin margins, particularly higher ethylene margins at Geismar, helped to mitigate the impact (see Shale Daily,May 9).

Armstrong said the continued growth in the fee-based business helped to dampen the blow from commodity margins and the impact of downtime at the Geismar facility. The olefins unit expects to hit an April 2014 target in-service date and bring online at the same time an expansion to increase ethylene production capacity by 50%.

The olefin margins fell sequentially by 3% but they were 26% higher year/year. Geismar volumes were 14% lower than in the first three months, and they were 16% down from the same period of 2012.

Geismar's interruption will be mitigated by $500 million of combined business interruption and property damage insurance. The current estimate of uninsured business interruption is $95 million and the company now estimates it would receive $384 million for the losses.

Meanwhile, in the Northeast, expansions to the Susquehanna Supply Hub gathering system in Pennsylvania are keeping "pace" with long-time producer partner Cabot Oil & Gas Corp., which is adding a sixth rig to the Marcellus this month (see Shale Daily, July 26).

Williams also is pursuing an OK from the Federal Energy Regulatory Commission to build the Constitution Pipeline, a 120-mile system to connect by 2015 Pennsylvania gas to northeastern markets (see Shale Daily, June 17). Also sanctioned is the long-planned Bluegrass Pipeline, designed to export liquids from the Northeast to rapidly expanding petrochemical markets on the East and Gulf coasts (see Shale Daily, July 1).

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