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Changing Gas Sources Present Rare Opportunity

Historically, gas supplies have flowed from the resource-rich Gulf Coast to the populous, but gas-starved, Northeast.

But now, the Northeast’s multi-billion-dollar natural gas pipeline buildout is reversing that decades-old flow pattern.

In particular, the Marcellus and Utica shale gas fields in Pennsylvania, Ohio, and West Virginia are pumping out a massive amount of natural gas.

Since November 2009, output in the Marcellus alone has increased by an astounding 800%, to the current rate of 16 billion cubic feet per day!

Not surprisingly, this new source of fuel is creating some profit opportunities with the gas transportation companies, namely pipeline companies.

Going Against the Flow

The reverse in supply location is no small occurrence, as most of the existing infrastructure was built to support an eastward flow.

For instance, the $6.7-billion, 1,700-mile Rockies Express pipeline was built to bring gas to the Northeast from the Rocky Mountain region.

Now, some of its flow – 1.2 billion cubic feet per day starting in 2015 – will go westbound from the Utica region.

This benefits two of the partners involved – Phillips 66 (PSX) and Sempra Energy (SRE).

In June, Goldman Sachs forecasted that 85% of the growth in U.S. natural gas production in the next four years will come from the Appalachia region. The firm also predicts that 60% of the demand increase will come from the Gulf Coast, thanks to petrochemical and liquid natural gas projects.

Not only does this mean that the pipeline flows will continue to be reversed, but that new gas pipelines will be constructed.

A Historic Opportunity

The real action is in the numerous pipeline projects that are already in the works. And the scope of the natural gas pipeline buildout is changing rapidly.

In just the past two months, according to Bentek Energy, the capacity of all the announced pipeline projects has doubled to 32 billion cubic feet per day.

One of the most prominent projects is the 550-mile Atlantic Coast Pipeline, a $5-billion project to move gas from the Marcellus and Utica area to the Southeast. It’s expected to become operational in 2018.

Dominion Resources (D) and Duke Energy (DUK) are the two primary partners, along with Piedmont Natural Gas (PNY) and AGL Resources (GAS).

Another development of note is the TEAM 2014 project, which will move 600 million cubic feet of gas each day from the Marcellus play to the Gulf Coast and elsewhere.

Spectra Energy (SE) is the company behind this project. It’s best known for its Texas Eastern Transmission pipeline to the New York City metro area from the Gulf Coast.

The Atlantic Sunrise project will move 1.7 billion cubic feet of Marcellus gas to the Southeast under the care of Williams Companies (WMB). This project is scheduled to be completed in 2017.

And the list goes on. . .

As I said, a capacity of 32 billion cubic feet per day of gas pipeline projects is in the works. Expect that and the pipeline projects to grow as the bounty of the Marcellus continues.

And “the chase” continues,

Tim Maverick

Tim Maverick

, Senior Correspondent

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