The Northwest and Southwest natural gas markets have undoubtedly been dominated by hydroelectric generation over the past winter season, which caused record-low power burn in the Southwest and one of the lowest winter averages in the Northwest over Platts Analytics Bentek history. Further pressuring natural gas’ market share – renewable generation has also proliferated the grid in both CAISO and BPA. Storage issues on SoCal Gas were essentially masked by a mild winter in southern California, however, withdrawals were still necessary from Aliso Canyon from January 24 -25. This weekly feature will review winter-over-winter changes in the West natural gas market coupled with Platts Analytics Bentek forecast for what to expect during winter 2017-2018. Please see page 2 for further analysis.
With construction on massive pipeline projects currently underway, all eyes are on the anticipated production growth and takeaway capacity they will provide. Developers behind the 3.25-Bcf/d Rover Pipeline project and the 1.5-Bcf/d Leach XPress project are working feverishly to clear trees and begin building the pipelines they’re trying to bring into service by year end. While this is going on, Northeast producers have ramped up drilling activity, raising active rigs from a low of 34 in August last year to current levels in the mid-60 range.
April 2017 power burn is expected to average 21.9 Bcf/d, up nearly 2.0 Bcf/d from the previous forecast for the month but still 1.9 Bcf/d below 2016 levels, providing limited natural gas demand support heading into summer. The forecasts for May and June each came up 1.2 Bcf/d to 22.2 Bcf/d and 25.8 Bcf/d, respectively, while the July outlook is level at 32.3 Bcf/d. Regional forecasts show the bulk of the year-on-year declines concentrated in the Southeast and Southwest with April power burn anticipated to average approximately 1.2 Bcf/d and 0.9 Bcf/d below 2016 levels, respectively. Northeast burn forecasts call for the largest regional year-on-year gain in April with 2017 anticipated to average 0.5 Bcf/d above 2016. Month-to-date power burn this March has averaged 21.8 Bcf/d, some 2.1 Bcf/d, or 9%, under 2016 levels and 2.5 Bcf/d, or 15%, above the February forecast. Year-on-year declines in power burn have hit all major markets, with the Southwest and Texas regions leading the decline as demand has trailed 2016 levels by 0.7 Bcf/d and 0.6 Bcf/d, respectively. While power burn in the Midwest, Northeast and Southeast regions is also trailing 2016, a late-winter cold snap helped demand in those regions close the year-on-year gap to between 0.2 and 0.3 Bcf/d compared to between 0.5 and 0.8 Bcf/d in February when regional temperatures were averaging as high as 7 degrees F above normal.