Natural Gas Intelligence
Bentek: Southeast/Gulf Coast Pipes Full in Two Years

Friday, July 18, 2008

Pipeline capacity out of the Southeast/Gulf Coast region is expected by Bentek Energy LLC to fill in less than two years, with outbound capacity utilization to hit 100% by winter 2009-2010. Look for aggravated gas-on-gas competition between the region and Rockies producers, the research and analysis firm warns in a new report.

In the third portion of its "I of the Storm" report series Bentek evaluates the impact of anticipated changes in gas markets nationwide as more than 75 gas pipeline, storage and liquefied natural gas (LNG) terminal projects are completed and go into service in the Southeast/Gulf Coast region between now and 2012.

The report explores current tight outbound pipeline capacity in the region, existing bottlenecks that constrain deliveries to such key markets as Florida and the Northeast, and insufficient planned outbound capacity expansions. This sets the stage for future excess supply buildup in the Southeast/Gulf Coast by as early as 2010, just as more production comes onstream and moves east into the region from hot unconventional shale gas basins. This regional supply surplus will create market imbalances with implications for other regions, shifting flow patterns and creating price differential disruptions in the backyard of the Henry Hub, Bentek said.

Higher gas prices, favorable market conditions, improved market access and significant cash flow and investment capital are spurring an unprecedented increase in gas production in the Barnett Shale and Deep Bossier Sands in Texas, the Woodford Shale in Oklahoma and the Fayetteville Shale in Arkansas, the Evergreen, CO-based research and analysis firm said.

"We anticipate an increase of 11.3 Bcf/d of additional wet gas production and 9.4 Bcf/d of dry gas production flowing into the Southeast/Gulf between January 2008 and December 2012," said Rusty Braziel, Bentek managing director. "Over the next five years, we expect new gas-fired power generation facilities, industrial load and some residential/commercial demand to drive a modest annual 1.5% demand growth from Texas to Virginia. However, this demand growth is seriously outstripped by the 6.9% average annual supply growth projected in the Southeast/Gulf during the same period."

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