February 17, 2017

Rover Pipeline Will Increase Regional Natural Gas Takeaway

According to a recent article in Natural Gas Intelligence, the Rover Pipeline – along with other recently approved pipelines – stand to have a dramatic effect on takeaway capacity for natural gas producers in the Appalachian region, including the Marcellus and Utica shale formations. This in turn will increase the diversity of supply available to regional and national markets, benefiting consumers throughout the Northeast.

A massive increase in natural gas pipeline capacity from Appalachia is poised to hit the market over the next couple of years, which when combined with a likelier looser federal regulatory environment, may temper Henry Hub prices in 2018 and beyond.

More infrastructure is necessary for bottlenecked Appalachian supply, but “wildcards” are mounting overall for the gas market, which tilts the outlook for Henry Hub prices in 2018 and beyond to “cautious,” analysts said.

As the article relates, Appalachian takeaway could nearly double over the next few years, thanks to projects like the Rover Pipeline:

“Despite these uncertainties, we are fairly confident that Northeast spreads will shrink in the coming years,” Horowitz and Freeman said. Gas pipeline is being added through at least 2019, and if all currently announced projects materialize on schedule, “the industry could see Northeast pipeline takeaway capacity essentially double by year-end 2020.”

“While many questions remain, our base outlook includes shrinking regional price spreads, growing Marcellus and Utica production, and a lid on medium/long-term Henry Hub pricing,” said the Raymond James team. “In addition to involved midstream players, this trend is positive for E&Ps with more exposure to higher risk/reward hubs.”

As demand for natural gas increases across the country, midstream infrastructure projects like Rover will facilitate access to natural gas produced in the Marcellus and Utica shale, alleviating the bottleneck effect currently in place:

“Fortunately, the U.S Midwest, Mid-Atlantic, Southeast, and Eastern Canada are all moderately growing end markets,” and midstreamers are adding capacity and redirecting existing systems.

New pipeline takeaway capacity thus should be able to do its part to debottleneck trapped gas and lead to regional production growth.

As analysts concluded, “Takeaway capacity … carves a path for production growth given many operators are able to generate sizeable returns well above hurdle rates on their core acreage at the very least.” As the Rover Pipeline prepares for construction activity, CEPI looks forward to the project’s ability to provide affordable, clean-burning natural gas to businesses, manufacturers, and consumers.