The Daley Note: June 21, 2023
On paper, the massive Mountain Valley Pipeline (MVP) has the potential to open new markets for Marcellus and Utica shale producers out of the Appalachia Basin. However, due to downstream constraints, East Daley Analytics anticipates MVP will run below half its capacity of 2 Bcf/d when the project is finally built.
Developer EQT Midstream (ETRN) has faced numerous delays moving MVP to completion since the project’s original 2018 start-up target. While new federal legislation has thrown MVP a lifeline, the pipeline would enter a changed natural gas market, leading to questions about its impacts on prices and flows in the Northeast region.
East Daley’s view is that MVP would have limited impact on Dominion South pricing and Appalachian production growth because the pipeline will not be able to run full. MVP would terminate at Station 165 of the Transcontinental Gas Pipe Line (Transco) system in southern Virginia, sending gas into the Transco Zone 5 market serving the Southeast. However, Transco has limited takeaway at the Zone 5 interconnect, preventing the system from receiving the full 2 Bcf/d potential of MVP without driving prices below those within the Appalachia Basin.
In our Northeast Supply & Demand Forecast, East Daley forecasts average throughput of ~700 MMcf/d when MVP is completed, or 35% utilization. Transco, owned by Williams (WMB), is effectively the only pipeline that can connect MVP shippers to end-users. The problem is Transco is fully contracted and often runs at or near capacity, leaving little room for the influx of gas from MVP.
We predict MVP would marginally benefit Dominion South pricing, but its main impact would be to cap upward price pressure at Transco Zone 5, particularly during winter or summer demand spikes. The Transco Zone 5 market is short gas during periods of high demand, and MVP will be able to bridge that seasonal gap. As a result, MVP would narrow the spread between Dominion South and Transco Zone 5 prices.
The proposed Southgate extension would add ~500 MMcf/d of egress from Transco Zone 5, which would boost volumes that MVP can ship to the region. However, the Southgate project has been placed on indefinite hold after the denial of an air quality permit. It may be possible for WMB to loop a portion of the Transco system to alleviate the constraint as well. – Alex Gafford Tickers: ETRN, WMB.
Request Access to Energy Data Studio
East Daley Analytics has launched Energy Data Studio, a platform for our industry-leading midstream data and commodity production forecasts. All clients have access to the new client portal. If you have not yet logged in, please fill out the form to request a registration email be resent.
Energy Data Studio leverages our G&P data set for insights into midstream assets across every major oil and gas basin in North America. Users can navigate detailed visual dashboards by region, pipeline, or individual asset to understand crude oil, natural gas and NGL supply at the most granular level.
Energy Data Studio is available through data downloads from the visual interface, in Excel files, or as a direct feed delivered into subscribers’ workflow via secure file transfer. To learn more about Energy Data Studio, please contact insight@eastdaley.com.
Review the Year Ahead in Dirty Little Secrets
The 2023 Dirty Little Secrets is Now Available! Is Midstream on the cusp of another infrastructure wave? Find out in our new annual report.
Dirty Little Secrets reviews the outlook for Midstream and commodity markets in 2023 and the years ahead. East Daley discusses the outlook for crude oil, natural gas and NGLs and the impacts to midstream assets in our 2023 Dirty Little Secrets annual market report. Click here for a copy of the 2023 Dirty Little Secrets report.
The Daley Note
Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.