Shale Gas Triggers Supply, Demand Role Reversal

Massive shale-driven production in the US Northeast and soaring demand from the Southeast will turn the nation’s traditional south-to-north and west-to-east pipeline natural gas flows and price spreads upside down, according to Bentek Energy, the natural gas and oil analytics unit of Platts.

The Northeast is poised to switch from the nation’s largest demand region to a net supply region, and the US Southeast is set to become a much larger net demand region after being a major supplier to the US gas market, according to a new Bentek Energy 10-year outlook report Son of a Beast - Utica Triggers Regional Role Reversal.

The report says that more than one-third of the US natural gas production increase from 2013 to 2023 - or 9.1 billion cubic feet per day (Bcf/d) - is expected to come from the Utica and Marcellus shale formations in the northeastern US, while nearly half of US demand growth, or 9.4 Bcf/d, is expected to occur in the Southeast over the same period. This will contribute to making the Southeast a premium market relative to most other regions, pulling increasing amounts of gas from the Northeast, Texas and the Midcontinent.

Bentek forecasts a 9 percent rise in natural gas prices by late decade at Henry Hub, a key North American hub and pricing reference.

Additional takeaways from the report include:

• Natural gas flows to the Northeast from other regions to plummet;net Northeast outflows to total 2.8 Bcf/d by 2023;
• The liquids-rich shale plays of Texas and the Midcontinent to contribute about 44 percent of the expected US natural gas supply growth over the next 10 years;
• Total US natural gas demand to rise 27 percent over the next decade, while US supply to climb nearly 38 percent;
• Substantial reconfiguration and repurposing of the US natural gas pipeline grid.