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Northeast Fall Shoulder Month Supplies Weigh on Market, Says Williams CEO

Northeastern natural gas markets have gotten a "strong signal" from the gas-on-gas competition in the Appalachian Basin this year, and there is now support for continued infrastructure development to take away more supplies, Williams CEO Alan Armstrong said Thursday.

Armstrong spoke with analysts for more than an hour to discuss the company's and Williams Partners LP third quarter results. Most of the time was spent discussing the Northeast, where Williams has a lot of gas pipeline infrastructure, giving it one of the better vantage points on the pipeline demand side. Together with Williams Partners, the Tulsa pipeliner operates Transcontinental Gas Pipe Line LLC (Transco), among other projects.

The CEO was asked his opinions regarding Northeast differentials now and going forward.

"I think there's been a lot of focus on just the Northeast dry [gas] area, and certainly there's more infrastructure over in the southwest [Pennsylvania] and over in the Utica area. But we're certainly seeing continued a lot of development over there as well...And I would say a lot of pressure has come on here in the third quarter from two factors, one being that certain pipes were not yet open, so Tennessee [Gas Pipeline] expansion wasn't online yet and that we think will help alleviate it…[see Shale Daily, Oct. 30].

"But as well, a lot of new gas came on in the quarter that wasn't necessarily from drilling, but it was from infrastructure tie-ins, not necessarily on our systems, but some of the adjacent systems really worked off a lot of the well connects and a lot of the pending completions. So we saw a tremendous amount of gas come on or trying to come on in the third quarter...And it was coming into a base of the market that was lower..."

Now, the Northeast Supply Link project has started up on Transco. "I can tell you, that's 250 MMcf/d," Armstrong said of the supply link. "That's hardly a drop in the bucket compared to the kind of demand that we're seeing for the infrastructure built out of the area."

Going forward, "the fall shoulders out there are going to be a little worse than the spring shoulders because this is kind of a rare situation up here where you have the Leidy storage, which is very large market area storage that refills in the spring, but of course, was full in the fall and so [there is] nowhere for that gas to go, either into those local markets or to the south."

Another Northeast project is the 120-mile-long, 30-inch diameter pipeline contemplated by Constitution Pipeline Co. LLC, the only actual big gas pipe newbuild in the Northeast today, to connect the gathering system in Susquehanna County, PA, to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, NY. Plans are for it to ramp up in 2015 (see Shale Daily, June 17).

Williams also has several other big pipeline projects in the works, including Bluegrass Pipeline with Boardwalk Partners that would carry Marcellus and Utica liquids to Gulf Coast markets for processing or for export; an open season was launched Tuesday (see Shale Daily, Oct. 25).

On the drawing board as well is Atlantic Sunrise to provide 450,000 Dth/d to more than 1 million Dth/d of year-round firm capacity from northern Pennsylvania along the Leidy Line, connecting to Dominion's Cove Point Pipeline interconnect in Fairfax County, VA, and south to Alabama (see Shale Daily, Aug. 13). Interest in the system was stronger than anticipated, Armstrong told analysts.

Pipelines like Transco now have "plenty of support" in the Northeast "for new infrastructure to debottleneck systems to be able to carry markets to the south, and certainly, the Atlantic Sunrise open season was indicative of that, and as well the Constitution project we think will alleviate some of the challenges up in the Northeast," he said.

For those "not paying attention and not planning for their capital expansion are taking some pretty big bets...and pretty big risks," said the CEO. "Those that are continuing to plan, and plan well, I think will be the winners at the end of the day and they'll be able to access growing markets...

"As usual, we tend to wait a little too late to get the infrastructure built and we'll probably be having the same discussion on Bluegrass here in '15 before that capacity comes on to get the NGLs out of there as well."

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