Less natgas supply to New England adds to volatility

  • Market: Natural gas
  • 16/11/18

An early season winter storm in the US northeast this week has shown that pulls on increasingly limited natural gas supplies along the Atlantic coast are likely to add to price volatility this winter.

The storm swept into the upper mid-Atlantic and New England regions yesterday, dropping heavy snow and sleet in its path and sending 14 November day-ahead spot prices at the Algonquin Gas Transmission Citygates index soaring to a nine-month high above $10/mmBtu. That price represents a level not reached at the New England index during the month of November since 2014.

Not much has been done since 2014 to relieve constraints on pipeline capacity in New England, but regional production has skyrocketed since that year. Appalachian production is forecast to top 30 Bcf/d (850mn m³/d) this month, up by 68pc from November 2014, according to the US Energy Information Administration.

Soaring prices seen this week indicate that incremental flows from Appalachia into New England remain no match for a strong cold snap. Further complicating matters this year is less supply expected from Canada. Encana in May permanently shuttered its Deep Panuke drilling platform off the coast of Nova Scotia, removing what once was a key source of flows into New England during the winter. Nearby production platform Sable Island's current production is about 80mn cf/d, but is expected to decline.

Production from Deep Panuke and Sable Island in past years was greater than local Canadian demand, so excess production, plus Canaport LNG deliveries, were shipped into New England through the Maritimes and Northeast pipeline. The line connects to both Algonquin and Tennessee Gas pipeline in Massachusetts. But this year both production and LNG deliveries in Canada have declined, causing net flows at the border to flip to serve Canadian demand.

Deliveries to Canaport this year are nearly double 2017 volumes, while exports to the US are flat on the year, implying that more gas is staying in Canada to serve local demand, Jake Fells with BTU Analytics said. Deliveries from the US into Canada on Portland Gas Transmission have also risen on the year, Fells said.

Any demand that sends New England prices soaring may incentivize Canadian gas to flow into the US, such as when Algonquin prices topped $100/mmBtu in January 2018 amid extremely cold weather.

Sable Island's current production is equal to 67pc of gas delivered into Massachusetts during peak winter months last year, meaning any further declines of production there "could be material for pricing," Fells said.

Expectations of further volatility this winter has already made its way into forward prices. Argus forwards show Algonquin at $11/mmBtu for winter 2018-19, compared with the index's winter 2017-18 spot price average of $7.70/mmBtu.


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27/05/24

Brent, FX drive Brazil natural gas price hike

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Q&A: Oman Shell to balance upstream with renewables


24/05/24
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24/05/24

Q&A: Oman Shell to balance upstream with renewables

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23/05/24

India’s AMNS signs 10-year LNG supply deal with Shell

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Shell to step up gas exploration in Oman


23/05/24
News
23/05/24

Shell to step up gas exploration in Oman

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China’s natural gas consumption to peak in 2040: CNOOC


23/05/24
News
23/05/24

China’s natural gas consumption to peak in 2040: CNOOC

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