Appalachia pipeline capacity could overwhelm supply: BTU Analytics

HOUSTON — Appalachian Basin unconventional producers for years have asked, pleaded — perhaps begged – pipeline operators to jumpstart takeaway capacity.

“Build it, and we will fill it,” was the producers’ phrase. But in fewer than two years, all that could change, as six greenfield projects, totaling just under 11 billion cubic feet per day (Bcf/d) of capacity, are slated to come online.  

“Appalachia production has been contingent on new infrastructure, and that is changing,” according to Matt Hoza, an energy analyst with analytics/consulting firm BTU Analytics.

Hoza was addressing roughly 60 attendees at last week’s BTU Analytics-produced “What Lies Ahead 2017” conference in Houston. Kallanish Energy was in attendance.

Hoza said there are 30 projects in the Appalachian Basin, in various stages of progress, that will contribute to the basin’s production growth.

Feb. 3 was a big day for pipeline development, as the Federal Energy Regulatory Commission revealed its three members one day earlier had approved four pipeline projects. The project quartet will cost $7.84 billion, carry up to 5.58 billion cubic feet of natural gas daily and, combined, totals more than 1,000 miles of length.

Two of the four FERC-approved lines last week that also are on Hoza’s Big 6 list are Energy Transfer Partners $4.2 billion, 3.25 Bcf/d, 713-mile Rover Pipeline, and Williams $3 billion, 1.70 Bcf/d, 200-mile Atlantic Sunrise Pipeline.

“Three of the six projects can be considered producer-pushed (gas producers driving construction), and three can be considered demand-pulled (local gas distribution companies and utilities are driving the projects),” Hoza said.

Another trio of projects, slated to flow nearly 3 Bcf/d of natural gas into New England, was omitted from Hoza’s list, due to being outright canceled, waiting on specific permits or receiving a negative state court ruling concerning moving forward.

But Hoza pointed out, moving pipeline projects forward, in addition to what generally a multi-year permit approval process, is extremely time consuming, due to such things as lawsuits and protests.

“Greenfield pipes out of the Appalachian region are under intense environmental pressure, and even regional pipelines facing challenges with delays,” according to Hoza.

Gas production in Pennsylvania, Ohio and West Virginia has quadrupled in the past five years to more than 20 Bcf/d, “thanks to displacement of inbound gas, increasing Appalachian demand, and increasing takeaway capacity out of the region,” Hoza said. Takeaway capacity is currently roughly 14 Bcf/d.

However, in the relatively near future, around 2022, Hoza/BTU Analytics projects the region will become overpiped, capacity to flow shale gas out of the region will overtake supply.

“Excess backlog has all but been exhausted, and will not be able to immediately fill new projects,” Hoza said.

Within two years, pipeline capacity will jump to roughly 35 Bcf/d, from approximately 27 Bcf/d in late 2018. Supply during the same timeframe will be relatively flat at 27 Bcf/d.

When pipeline takeaway capacity jumps to 40 Bcf/d in mid-2020 (provided all announced projects are built), production will lag by roughly 8 Bcf/d, according to BTU Analytics.