Marcellus shale gale shifts geography of natural gas supply and demand

Natural gas production ticked up in the United States by about 1% last year, according to the U.S. Energy Information Administration. This modest growth masks massive changes in the geography of domestic gas production, which has strained operating conditions on at least one major interstate natural gas pipeline in the Northeast.

The primary pipelines that serve the Northeast originate in the Gulf Coast, which has historically been the primary U.S. producing region. As a result, natural gas has traditionally flowed from south to north.

That is changing and changing fast.

The abrupt decline of production at the Haynesville Shale formation in Texas has reduced the flow of gas from south to north. Meanwhile, the equally abrupt and dramatic production gains in Pennsylvania’s portion of the Marcellus has increased the flow of gas from north to south.

The reversal is happening so rapidly that Dominion Transmission, Inc. (DTI), a subsidiary of Richmond, VA-based Dominion that operates about 7,800 miles of pipeline in Pennsylvania and five other states, said it would begin restricting north to south gas deliveries in western Pennsylvania on its system beginning on February 1, 2014.

Flow patterns both affect and are affected by pipeline hydraulics, which can be difficult to manage during shifts in geographic centers of supply and demand.

Over the past three weeks, Dominion East Ohio has asked customers to conserve natural gas by lowering the settings on their thermostats and water heaters on multiple occasions. The request was made to avoid pressure drops from disrupting pipeline service during periods of extreme cold weather.

In addition to declining production levels in Louisiana and the Gulf of Mexico in recent years, the Haynesville Shale formation in Texas has experienced sudden and severe production declines.

By contrast, production has risen more rapidly than anyone had anticipated in the Marcellus Shale formation in Pennsylvania and West Virginia. The Marcellus region, which produced less than two billion cubic feet per day (Bcf/d) as recently as 2010, is projected to provide a stunning 18% of total U.S. natural gas production in February.

Pennsylvania has become an especially prodigious source of natural gas. From 2011 to 2012, Pennsylvania’s marketed natural gas production grew by 72% and leaped from the seventh-largest to the third-largest marketed gas-producing state, according to the EIA’s Natural Gas Annual, 2012.

Production growth remained robust in 2013. And there is no sign of tapering anytime soon.

In the meantime, the flow of gas from south to north is likely to decline still more over the next two years as liquified natural gas exports increase and Mexican exports ramp up. If it does and the Marcellus Shale sustains current production growth rates, the Northeast may start exporting gas to the Gulf Coast in a few years.

http://www.forbes.com/sites/williampentland/2014/01/30/marcellus-shale-gale-shifts-geography-of-natural-gas-supply-and-demand/?ss=business%3Aenergy