The Perryville Hub in North Louisiana continues to raise its profile in the Gulf Coast region on the shoulders of Midcontinent shale gas production and growing gas-fired power generation demand in the Southeast. Pipeline operators are responding with efforts to streamline trading at the location with the expectation that it will become the supply-demand crossroads for shale gas and power plants.

Earlier this year Boardwalk Pipeline Partners LP’s Gulf South Pipeline Co. LP launched its Perryville Exchange Service (PXS) to streamline the trading across multiple interconnects in a 70-mile area near Perryville. PXS began business April 1, and on May 1 it was listed on IntercontinentalExchange (ICE). On July 10 the point had its first trade on ICE.

CenterPoint Energy Gas Transmission Co. LLC (CEGT), which also is a major pipeline presence in the Perryville region, has its own Perryville Trading Point (PTP) (see Shale Daily, March 22). The point was listed on ICE May 14 and had its first trade on ICE June 1.

NGI’s Daily Gas Price Index began publishing a Perryville spot market index in the daily, weekly and bidweek versions of its Gas Price Index newsletters on July 2. The index consists of the interconnects that comprise the separate Perryville Hubs as defined by CenterPoint and Boardwalk, as well as other pipeline connections in the immediate area.

Industry thinking about Perryville has been evolving for years. Back in 2005, when Hurricane Rita shut down business at Henry Hub, some looked to Perryville to the north as an alternative, Boardwalk Pipeline Partners Chief Commercial Officer John Haynes remembers. A year later, CenterPoint was bringing Barnett Shale gas from Carthage, TX, to the Delhi-Perryville area.

“That was the first notion that unconventional gas would be moved from North Texas to the points of liquidity that the producers were after,” Haynes told NGI’s Shale Daily. “They didn’t want to be trapped in one market, like North Texas. They could see so much gas coming and they wanted more liquidity.”

Gulf South responded to building Barnett Shale production with its East Texas Expansion from Carthage to the Perryville Area. At the time, gas was mainly coming from North Texas and southern Oklahoma, and then the Fayetteville Shale in Arkansas was coming on.

“A lot of gas is trying to move out of these basins and find liquidity somewhere,” Haynes said. “A number of people were staring at the Delhi-Perryville location thinking ‘if we’re going to find a physical location where more gas could be transacted and buyers and sellers could find each other, it would probably be in that area.'”

In the early days of the shale plays, producers spent heavily to acquire transportation capacity to avoid having their gas shut in during the rush to get to market. “The early movers in the shale plays could see their volumes were going to increase rapidly, and the alternative of building a 30-mile pipeline over to another pipeline was not attractive,'” Haynes said. “They saw that they had limited pipeline capacity in North Texas, so they decided to move gas eastward to the major interstate pipelines that offered better market access and greater takeaway capability.”

The majority of the pipeline expansions over the last six years or so have been underwritten by producers. “At the end of the day, do the producers want to hold all that long-haul capacity? Do they really want to own that? I don’t think so…” he said. “I think broadly speaking, they like to find points of liquidity and sell there.”

For Midcontinent producers and Southeast consumers, that point of liquidity is Perryville, perhaps more so in the future, though.

Haynes said trading at the point has been picking up. “In the past few weeks there have been several deals concluded at the Perryville Exchange, and we see this as just the beginning,” he said.

Poe Reed, CenterPoint chief commercial officer for pipelines, said CenterPoint has been adding the PTP to customer contracts. Activity on ICE has not been “huge” so far. “We feel the PTP volumes will grow as existing point-to-point gas purchase and sales contracts roll off and buyers and sellers start to nominate gas to the PTP pool,” he said. “That should lead to more ICE activity. For now, more transactions are happening off the box, but we think that changes as producers and markets become familiar with the new services.”

Haynes said it will take market participants time to become accustomed to the new services available at Perryville. “…[E]verybody’s trying to figure out what’s going to take place there and how do we do this. It costs nothing to set up a contract, so we’re helping customers set up to transact on the Exchange.”

Besides streamlining purchases and sales, Boardwalk and CenterPoint are providing their power generation customers access to their own and third-party storage in the region, which facilitates the load-shaping gas-fired power generators require.

“We’re offering a lot more flexibility than we ever did in the past, both on Texas Gas and on Gulf South,” Haynes said. “Because we can do that, that’s a value-added service for the end-users that the producers don’t necessarily want, and they don’t want to pay for it because it’s not a benefit to them.”

But it is of value to gas-fired power generators, of which there will likely be more in the coming years.

“We continue to be optimistic long term that the coal plants are going to be retired and they’re going to be replaced with gas,” Reed said. “That’s good for the industry. We need demand growth for sure, and I think it’s going to be good within our footprint.

“Services like the Perryville Trading Point at the Perryville Hub just help facilitate that.”