Transcontinental Gas Pipe Line (Transco) was to start up service over the weekend on the first pipeline loop of its major Northeast Supply Link expansion, one of the key links in sending new gas out of the Marcellus Shale.

FERC approved the Williams’ pipeline’s request to begin flowing natural gas late Friday. The project, when completed in its entirety later this year, will provide incremental firm transportation service from the Marcellus Shale to meet growing demand for gas in Pennsylvania, New Jersey and New York City.

Transco plans to flow gas through the three-mile Palmerton Loop in Monroe County, PA, while it takes its Leidy C Line, which extends from Luzerne County, PA, to Hunterdon County, NJ, out of service to perform crossover work to tie it into the new loop, said Chris Stockton, a spokesman for Oklahoma-based Williams, parent of Transco. The C Line runs parallel to the Palmerton Loop, he said.

There will be no immediate increase in volume on the Transco pipeline, just the redirecting of capacity while the work on the C Line is conducted, Stockton said. He did not know how long the work on the C Line would take.

The Palmerton Loop is the first of 13 miles of looping to be built in Pennsylvania and New Jersey as part of the expansion of the pipeline. In addition to the loop facilities, Transco also plans to install a 25,000 hp electric motor-driven compressor station and substation in Essex County, NJ, (Station 303); and install a 16,000 hp natural gas turbine-driven compressor unit at its existing Compressor Station No. 515 in Luzerne County. The project was approved by the Federal Energy Regulatory Commission (FERC) last year (see NGI, Nov. 12, 2012).

The entire project, when completed later this year, will provide 250,000 Dth/d of incremental firm transportation capacity from supply interconnections on Transco’s Leidy Line in Pennsylvania to its 210 Market Pool in New Jersey and the Manhattan, Central Manhattan and Narrows delivery points in New York City.

Despite gains in pipeline capacity additions and shale-driven gas production, the greater New York metropolitan area, and especially New England markets, still experience frequent constraints.

More than half of the natural gas pipeline projects that entered service last year were in the Northeast, according to the Energy Information Administration. The two largest projects added to the Northeast in 2012 — Dominion Transmission Inc.’s Appalachian Gateway Project and Equitrans LP’s Sunrise Project — both move natural gas from Marcellus production fields to northeastern markets.

It’s not only the markets that are suffering. Producers are filling the pipes as fast as they are built and looking for more capacity.

“The import-export capability in the Appalachian region is really starting to feel tapped out,” said Genscape Inc. senior natural gas analyst Andy Krebs. Analysis of the region, including compressor station flows on Transco, indicates that “we have displaced all gas that we potentially can; we have pushed back everything that we can to Canada. In fact, we’re exporting out of the Niagara Spur now; there’s no import volumes from Canada. There’s really no import volumes on Tennessee, Tetco and Transco, and in particular this spring, we’ve seen a big pushback on Transco and Tetco. And then on top of that we’re pushing back as much volume as we can for the Midwest,” Krebs told NGI.

The restraints are showing up in the prices. Basis differentials into Tennessee Zone 4 Marcellus have been extremely weak and volatile since April 2012, but now Dominion and Transco-Leidy line are getting into the act, according to NGI‘s Bidweek Survey.

Those latter two pipelines, which like Tennessee Zone 4 serve the Northeast Pennsylvania part of the Marcellus Shale, posted July 2013 basis differentials of negative $0.27 and negative $0.32 cents, well below their respective averages of negative $0.04 and negative $0.06 cents since April 2012. Even Columbia Transmission, which serves the Southwestern Pennsylvania and West Virginia portion of the Marcellus, posted a negative basis differential of $0.04 in July, after being in positive territory for most of the previous year.

Transco’s Northeast Supply project is fully subscribed to four shippers: Williams Gas Marketing Inc. (135,000 Dth/d), Anadarko Energy Services (67,500 Dth/d), MMGS Inc. (32,500 Dth/d) and Hess Corp. (15,000 Dth/d).

Transco, which extends from South Texas to New York City, has the ability to deliver as much as 9.8 Bcf/d to its market areas in the Southeast, Mid-Atlantic and Northeast states, Williams said.

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