9/21: Gas Going Down South

The international natural gas market has been tight and dealing with high prices for the last year. Russia's invasion of Ukraine exacerbated the already volatile market and today it looks like elevated prices and tight balances may be here to stay for a while. While that's a major hurdle for industry and consumers as well as a headwind to economic growth, it's a boon to the LNG market - particularly the multitude of projects aiming to export gas from the U.S. Gulf Coast. But the big question on everybody's mind is, if Marcellus and Utica gas production growth is constrained due to the inability to build new pipelines out of the Northeast, where will the gas come from? And will there be capacity constraints along the way?

One answer to the growing demand on the Gulf Coast will come from the Haynesville, which RBN anticipates will grow by about 3.8 Bcf/d from 2022 to 2025 (yellow bars in figure 1). However, pipeline capacity to move gas from North to South is already showing signs of stress with basis at NGPL TXOK and COL MAINLINE averaging discounts to Henry Hub of $0.39/MMbtu and $0.43, respectively this year, according to our friends at NGI.

Figure 1. RBN Mid Production Forecast for Haynesville Natural Gas. Source: RBN

But, like the U.S.'s other major gas-focused basins in Appalachia, the question has just as much to do with the ability to get gas to market as it does with the productivity of the acreage. Over the past 6 years, gas flows from North to South along what RBN dubs the Central Corridor (shown by the pipes in figure 2) have grown from 3.6 Bcf/d by 5.25 Bcf/d to an average 8.75 Bcf/d in 2022. The most recent increase has been a result of DTE's Leap pipeline (purple bar segment) which has added 1 Bcf/d of capacity. But is there capacity for another 3.8 Bcf/d of production growth?

Figure 2. Average Annual North-to-South Natural Gas Flows in Central Louisiana. Sources: RBN, Genscape

The short answer is yes, there is and will be capacity to grow production from the Haynesville. Currently, while most of the pipelines shown in figure 2 are running at or near capacity, there are some notable exceptions. Additionally, several major new pipeline projects planned to come online between now and the end of 2024 (including expansions to the aforementioned Leap pipeline as well as other major projects by Enterprise, Energy Transfer, and Williams among others) ought to provide enough room for Haynesville production to grow under even RBN's high scenario, which sees 2025 annual average production in excess of 20 Bcf/d from the region. 

But, lest you think it's all clear sailing, the questions only get tougher after that. Planned LNG export capacity from the regions could grow by another 6.5 Bcf/d over the subsequent 5 year period (to 2030). To keep up will all the latest flow data and LNG insights, check out RBN's LNG Voyager