Northeast Pennsylvania E&P Pain Could Be Power Plants’ Gain-Part 2

BTU Analytics wrote a blog on Northeast Pennsylvania production,  pipeline expansions and power plants back in November 2015 and we highlighted concerns about pipeline delays crimping Northeast Pennsylvania E&Ps ability to grow production while power plants in the producing area would provide some reprieve.  Looking back now, our concerns about Constitution Pipeline were valid as that project is now in ‘pipeline purgatory’ under indefinite environmental review compliments of New York Governor Cuomo’s Administration.  However there is some good news out there for Marcellus producers.

If we take a step back and look at the macro U.S. gas market and the impact of coal retirements, combined-cycle natural gas power plant development and relatively low gas prices we can see that overall the U.S. power burn sample summer-to-date is up 1.3 Bcf/d summer 2016 vs. summer 2015 despite what so far has not been a hot summer (see slide below).   One of the tail winds in this story is large new gas-fired power plants coming online as is the case with the Panda Energy Patriot plant located in Lycoming County PA.  This plant started receiving gas off of Transco on June 21, 2016 and has been burning 98 MMcf/d over the last week as shown below.

Slide 1

Cabot Oil & Gas which was planning on using Constitution Pipeline capacity to grow production has turned to other avenues to grow production including doing deals with power plants in the supply area.  Cabot announced on July 5, 2016 that it had recently inked a deal to supply natural gas under a long-term sales agreement to the 1,480 MW Lackawanna Energy Center located in Lackawanna County PA as shown below.

Slide 2

The PJM generation queue shows 18 natural gas plants under construction in Pennsylvania with a total of 9,690 MW of new capacity.  Some of these plants, such as Sunbury and Good Spring are currently located a good distance from existing intrastate pipelines however new pipeline expansions in the form of UGI’s Sunbury pipeline and William’s Atlantic Sunrise will provide supply to these plants once the projects are in service.  If long haul Northeast pipeline expansions continue to face regulatory head wind, supplying local power plants may be the best way for Northeast Pennsylvania E&Ps to grow production in the interim.  The one fly in the ointment for the macro U.S. natural gas balance may be new combined-cycle natural gas-fired power plants with lower heat rates may displace high heat rate gas combustion turbines and old gas cogen resulting in more megawatts produced using less gas burn.  To get more information on BTU Analytics’ Northeast Gas Quarterly click here.

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Andrew is the CEO at BTU Analytics, LLC and has worked in the energy and technology industries for over 20 years. Prior to BTU Analytics, he was the Senior Commercial Director of North American Natural Gas at Platts-Bentek Energy where he led the natural gas analytics team. Andrew’s past experience includes positions at Amoco Production Company and Constellation Energy. He holds a Masters in Energy and Environmental Analysis from Boston University and a Bachelors in Geology from Colorado College.

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