ANALYSIS: Ethane rejection ups flows on Dominion pipe, weakens gas prices

Friday, August 10, 2012

Ethane rejection in the US Marcellus Shale has led to increased gas supplies piling onto the Dominion pipeline, upsetting a historic price relationship between two Appalachian gas hubs, a Platts analysis shows.

The historic price premium of the Dominion, South point over the neighboring Columbia Gas, Appalachia market has reversed into as much as a 7-cent discount over the next two years.

Although natural gas liquids infrastructure exists in the US Northeast, these are inadequate compared to the amount of NGL being produced, sources said.

Flow data from Platts unit Bentek Energy shows, however, Pennsylvania production is growing on Dominion's pipeline with flows there hitting 430,000 Mcf Wednesday, compared to the year-to-date average of 333,000 Mcf/d and the year-ago level of 180,000 Mcf/d.

Bentek data shows the number of horizontal rigs in southwest Pennsylvania went from seven in January to 24 in July, with the ramp-up taking hold in May. The number of new horizontal wells drilled in the area went from 139 last year to 214 for the year-to-date, the data shows.

The forward markets show this weakness persists, and even deepens, until the end of 2014, when the new ethane pipeline projects go into service and the waivers expire.

For more information please visit Platts Website.