The Marcellus Shale is the "Beast in the East" that will impact regional flow patterns, capacity utilization, regional prices and basis relationships.
The dramatic changes in natural gas price relationships and market dynamics that have taken place across North America over the last two years have been fundamentally driven by unconventional gas production growth and the pipeline construction necessary to accommodate that growth. However, equally significant changes are still to come as the Marcellus Shale producing area in the Appalachian Basin grows into a dominant source of supply in the upcoming five years.
Platts Market Alert, Beast in the East, defines the "Beast in the East” as the growing Marcellus Shale production, which is expected to increase 0.6 Bcf/d this year alone, compared to average 2009 production. Even a very conservative projection of Marcellus production growth leads to average Appalachian Basin production forecast of 4.0 Bcf/d in 2014 compared to about 2.2 Bcf/d in 2009. Platts' aggressive growth case shows total Appalachian Basin production reaching more than 6 Bcf/d by 2014.
To support this rapid growth, the gas industry is developing or has announced more than 30 gas pipeline expansion projects in the Northeast. In total, these projects would add more than 12 Bcf/d of gathering, short-haul and long-haul pipeline transportation capacity to markets and pipeline interconnects in the region. Even if a few of these pipelines are constructed, this new capacity can be expected to have a major impact on the dynamics of regional gas flow patterns and capacity utilization. Platts expects these developments to drive widespread changes to regional prices, basis relationships and the value of firm pipeline transportation contracts.