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Not Out of the Woods Yet: Update on Rover Pipeline

The startup of Phase 2 of the Rover pipeline is nearing completion, which is set to bring about 1.5 Bcf/d of incremental pipeline takeaway capacity from the Southwest Marcellus/Utica this spring. The project, however, continues to make headlines, as horizontal directional drilling (HDD) operations were ceased last week at a site under the Tuscarawas River in Stark County, OH due to loss of drilling fluid returns, as illustrated in the map below. This is reminiscent of the inadvertent return of drilling fluid to wetlands that occurred in April 2017 at the same location while drilling for Mainline A, which resulted in HDD operations being halted and a lengthy, detailed review process of HDD plans. It is important to note that this time no fluid has reached the surface and no impacts on sensitive resources have been documented. However, the Ohio EPA has requested FERC require abandonment of the current installation for Mainline B. FERC requested additional analysis from the project, including alternative locations for the crossing, and the impact on capacity should the Mainline B crossing not be completed, and Rover has responded.

The question, always, is the effect this halt in progress may have on the startup of the remaining portion of project. Assuming Rover has sufficiently addressed FERC’s requests in their response, this may prove to be another relatively small hiccup for a project that has suffered from numerous setbacks and challenges during construction, though it could push the startup date into 2Q18 from the end of 1Q18. The Tuscarawas drilling site seems the most challenged, though the project does still have 14 remaining HDD locations to finish, including the Tuscarawas drill, having already completed 35. The completion of Phase 2, which will bring the total capacity to 3.25 Bcf/d, includes the second mainline, additional laterals, and the section that connects north to Vector pipeline and ultimately the Dawn market.

With the startup of Phase 1B in December, flows on the pipeline have increased to about 1.4 Bcf/d, just shy of the current capacity of 1.7 Bcf/d. Current firm transportation commitments are 1.6 Bcf/d, as illustrated in the figure below. The completed project ultimately has 3.1 Bcf/d of firm commitments, with additional commitments coming from Ascent, Gulfport, Range, Eclipse and Southwestern.

Once Phase 2 of Rover is complete, it will increase total takeaway capacity from the Marcellus/Utica to the Midwest to 6.9 Bcf/d. With the completion of Nexus pipeline, due at the end of 2018, total capacity to the Midwest will increase to 8.4 Bcf/d, which is approximately the total gas demand in the Midwest during the summer, as illustrated in the figure below. Midwest demand is currently served by other regions, including Canada, the Midcontinent, and Rockies. As more Marcellus/Utica molecules can make it into the Midwest with the completion of Rover and startup of Nexus, this will place downward pressure on supply basin prices as regions compete for space in an area with limited demand growth. This will be exacerbated as increasing Permian production places pressure on the Rockies and Midcontinent through 2019, as the Permian waits for new gas pipeline projects to increase capacity south.

Check out our What Lies Ahead conference in February as we discuss these evolving regional natural gas dynamics over the next five years with the startup of these new projects, and check out the Northeast Gas Outlook for monthly updates on Rover and other key pipeline projects impacting the Northeast market.

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Marissa Anderson is the Manager of Data Analytics at BTU Analytics, LLC. She has diverse experience in the energy industry including fundamental analysis, investor relations and engineering. Prior to joining BTU Analytics, Marissa was a Senior Investor Relations Analyst with MarkWest Energy Partners, L.P., and a Senior Energy Analyst with Bentek Energy where she focused on the Natural Gas Liquids market. Marissa holds a B.S. in Chemical Engineering from the Colorado School of Mines, an M.S. in Global Energy Management from the University of Colorado Denver, and is a licensed professional engineer in the state of Colorado.

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