The Desk
Braziel: What Do I See Coming?

Thursday, December 20, 2007

New pipelines will shift flows and capacities. The Rockies Express will push supply surpluses into eastern markets. LNG could wreak havoc with Gulf Coast pricing. Or not. Independence Hub is flowing almost 1 Bcf/d. Crude oil prices continue to flirt with $100/bbl. The sub-prime mess could suck down the economy. The falling US dollar is roiling import/export economics.

The big dog of these developments is Rockies Express. It will pull Summer Rockies prices into parity with other producing regions and put pressure on prices in competing supply basins. Most industry forecast models have this shift factored into the numbers. Less understood is the impact of new pipeline, storage and LNG terminal construction in the Southeast/Gulf region. We loosely define this as a 650-mile wide swath from the Bossier Sands and Fort Worth producing basins in Texas eastward to Transco Station 85 in Choctaw County, Alabama and down to the Florida Panhandle. This area is experiencing an energy infrastructure construction boom the likes of which have not been seen in decades.

There are over 15 natural gas pipeline projects already or soon to be underway that will shift flow patterns, disrupt regional pricing relationships and realign the value of firm transportation capacity across the pipeline grid. Projects from Boardwalk, Centerpoint, Spectra, Energy Transfer, Enterprise, Kinder Morgan, Enbridge and others will add over 7 Bcf/d of pipeline capacity from the prolific Barnett, Woodford and Fayetteville shales and the Bossier Sands region across the Southeast/Gulf region. A dozen new storage facilities in the region could be in place before the end of 2008, adding 12 Bcf/d of high deliverability withdrawal capacity. Independence Hub has come on strong and is already flowing almost 1 Bcf/d. Four new LNG terminals will add sendout potential of 10 Bcf/d before the end of Q1 2009. And in early 2009 you can add to all this about 1 Bcf/d of Southeast/Gulf supplies which have traditionally moved into the Ohio region that could be displaced by Rockies Express deliveries.

So what does all this mean for the market?

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