Natural Gas Intelligence
Bentek: New Midcon Pipe Capacity, Drilling Plunge Leads to Mayhem

Tuesday, May 12, 2009

Completion this year of 3 Bcf/d of pipeline takeaway capacity within the 13-state Midcontinent natural gas market will give producers new marketing opportunities and improve regional pricing differentials, but the plunge in onshore gas drilling activity may have consequences, Bentek Energy said in a new report.

In its report titled "Mayhem in the Midcon," Bentek cited several factors converging this year that will result in "major shifts" within the Midcontinent. As new capacity is placed into service, the Rockies Express (REX) East pipeline expansion is scheduled for completion, bridging markets in Chicago, Michigan and Ohio with the supply areas of the Rockies, Midcontinent and the southeastern/Gulf Coast area.

Complicating the capacity markets, however, is the reduction in onshore gas drilling activity from a year ago, Bentek noted.

The result, said the Colorado-based consultant, is gas market mayhem.

"Midcontinent gas flow patterns have been in a state of flux over the past two years because of the REX West pipeline and the rapid growth of unconventional production across the region," said Bentek Managing Director Rusty Braziel. "As a result, the Midcontinent production zone basis dropped to an average of minus $1.73 in 2008, compared to only minus 88 cents in 2007.

"But new pipelines out of the region are changing things fast," he said. "Two major pipeline expansion projects, Midcontinent Express (MEP) and the Gulf Crossing project, recently began service and are providing Midcontinent producers with new outlets into the Southeast/Gulf region. In addition, Texas Gas has brought two laterals on-line to deliver more than 1 Bcf/d of Fayetteville Shale gas to pipelines serving markets in the Midcontinent, Northeast and Southeast."

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