Growth in natural gas production from the Marcellus region of Pennsylvania, West Virginia, and Ohio has lowered the spot price of natural gas at the TCO Appalcachia trading point in recent years, according to the US Energy Information Administration (EIA).
The forward curve for the TCO Appalachia was also negative relative to Henry Hub in the middle of 2012, but unusually cold winter weather in late 2012 and early 2013 changed the dynamic in the spot market.
Natural gas prices in the Mid Atlantic have traditionally been more expensive than Henry Hub, reflecting the cost of moving natural gas from production in the Gulf region to consumers along the East Coast.
Increased production from the Marcellus region began changing this relationship in 2011. Forward market prices for natural gas suggest that production growth is set to continue, driving the price in the region below the benchmark Henry Hub price by early next year.
Growth has been generated primarily by increased dry gas production in northeastern Pennsylvania. This has coincided with infrastructure improvements in the region. Gathering lines and pipeline capacity expansions has helped to transport more gas to market.
Natural gas production in the Northeast has grown by approximately 3.2 billion ft3/d in 2013, a 30% increase from the same period last year, total natural gas production in the region reached 12.2 billion ft3/d in August, a 4.1 billion ft3/d increase from August 2012 and a 2.5 billion ft3/d increase from the end of last year.
Production in West Virginia reached 2.4 billion ft3/d in August, 0.8 billion ft3/d above the August 2012 level. 0.6 billion ft3/d of that growth has been generated in 2013.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/10102013/marcellus_growth_to_drive_appalachian_natural_gas_prices_below_henry_hub734/