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What Does Rising Natural Gas Production Mean for Energy MLPs?

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Dec. 4 2020, Updated 10:52 a.m. ET

Higher production

According to the US EIA (Energy Information Administration), US natural gas production averaged 73.6 Bcf/d (billion cubic feet per day) in 2017. The EIA expects natural gas production to average 81.7 Bcf/d in 2018, 8.1 Bcf/d higher than the 2017 level. If that happens, it’ll be the highest annual average growth ever recorded. The EIA expects natural gas production to also increase in 2019.

According to the EIA, the Appalachia region, or the Marcellus and Utica shale plays, contributed to the massive rise in US natural gas production. Gas production in the Appalachia region rose by more than 14 Bcf/d since 2012. Improvements in drilling technology contributed to the increase in production in the region.

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Natural gas prices

In February 2018, the U.S. Henry Hub natural gas spot price averaged $2.66 per MMBtu (million British thermal units). Winter weather moderated in February contributing to lower prices than in January 2018. The EIA expects Henry Hub spot prices to average $2.99 per MMBtu in 2018 and $3.07 per MMBtu in 2019.

Key projects

Energy Transfer Partners’ (ETP) Rover pipeline project is designed to move natural gas out of the Utica shale. Phase 1B of the project got approval in December 2017. The rover pipeline started partial service in August 2017. The last phase of the project is expected to be in service by the end of 1Q18.

Williams Partners’ (WPZ) Atlantic Sunrise Pipeline is designed to move natural gas out of the Marcellus Shale to markets in the mid-Atlantic and Southeastern states. The nearly $3 billion project is expected to be placed in service in mid-2018.

TransCanada’s (TRP) Leach XPress project was placed in-service on January 1, 2018. The FERC (Federal Energy Regulatory Commission) has issued a “public convenience and necessity” certificate for TransCanada’s Mountaineer XPress and Gulf XPress projects. These two projects are expected to be in-service in late 2018. All the three projects link the Appalachian natural gas supply to the US markets.

Let’s take a look at US natural gas exports in the next part of this series.

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