Improving Data Aggregation and Analysis
A ComTechAdvisory Whitepaper
NATURAL GAS – NEW SUPPLIES AND GROWING GLOBAL PRICE INFLUENCE
Beginning around 2010, the North American natural gas markets experienced a massive restructuring of supply which has reshaped and redirected a significant portion of the country’ s delivery infrastructure, created an almost persistent oversupplied condition, and has changed many of the sources, types and channels of data on which traders rely.
With the advent of long-reach horizontal drilling techniques and massive hydraulic fracturing, a wealth of supply has been brought on-line from fields that were otherwise uneconomic to produce, including the hugely prolific Marcellus and Utica shales, which combined now account for more than 23 BCF of the US’ total daily production of 70 BFC. The resulting shifting of supply to the Northeast US from the Gulf Coast has redirected pipeline flows and rewritten pricing relationships that have existed for more than two decades. With new pipelines and new processing facilities under constant development in the Northeast, price development at the emerging trading hubs in the region are in a state of flux and pricing forecasting is a constant challenge for traders.
With the establishment of new and increasingly liquid trading points in the Northeast, the Gulf Coast trading locations, such as Henry Hub, are becoming disconnected from the large gas markets in New England and the upper Midwest. With redirected gas flows and the breakdown of many of the historical basis relationships that had existed between Henry Hub and much of the Eastern and Midwest US markets, many traders have been forced to formulate new strategies and uncover new market opportunities.
Spurred in large part by an oversupplied market and low prices, investments in new gas export facilities increased- including LNG liquification plants for exports to the global markets, and new pipelines to service growing demand from the newly liberalized Mexican natural gas market. With the opening of the Mexican markets to wholesale competition, increasing US gas exports to Mexico are providing near term price support for the oversupplied Gulf Coast region. With exports reaching 4 BCF / day at end of 2016 and increasing to an estimated 5 BCF / day in 2017, planned capacity additions in late 2017 and 2018 could see, in total, as much as 9 BCF / day moving south if the Mexican market demand continues to increase.
Beyond exports by pipe, the development of LNG export facilities, including the now operating Chenier facility at Sabine Pass( which is now a reliable consumer of about 900MM / day and is expected to increase to 1.5BCFD prior to year’ s end), the US has become a significant player in the global LNG markets; and in the process has effectively connected the domestic market to global natural gas prices. With additional
© Commodity Technology Advisory LLC, 2017, All Rights Reserved.