Eastern Gas (formerly Dominion) South Prices have declined lately as pipeline maintenance has reduced egress capacity and demand has been limited.
Recent Situation – The seasonal strip chart below is a great tool to see how prices reacted following recent announcements. Note: We use Eastern Gas to discuss price action in Appalachia, serving as a proxy to other named hubs.
Price Location: Eastern Gas (Dominion) South
The Eastern Gas (Dominion) South point is located in the Appalachian Basin, near Pittsburgh, PA, and serves as a liquid proxy for Northeast gas basis. The Northeast gas market has undergone dramatic changes over the last several years. The pipeline map shows the different corridors out of the Appalachian basin as well as the Eastern Gas (Dominion) South pricing point. The shaded circle is where the bulk of the Appalachian supply is located.
November 7, 2023 - Prompt Eastern Gas basis prices have continued to recover from an August low of -$1.68/MMBtu. The prompt contract has climbed to $-0.92. While the next few winter strips have improved as well, the Summer '24 and Summer '25 strips have declined to $-1.14 and $-1.24, respectively.
The largest potential factor affecting the future of pricing in the Appalachian region is the completion of the Mountain Valley Pipeline. At first glance, an in-service MVP, that will have a capacity of 2 Bcf/d, should improve basis pricing. However, upon further analysis, there seems to be downstream constraints on the Transco mainline that will not allow MVP to flow at its full potential until upgrades are made over the next few years.
The forward curve reflects the reality that MVP will have little initial impact. The smaller incremental egress gains provided by MVP's future in-service will likely be quickly back filled with supply - returning the basis to its current steady state.
The in-service dates for the pipelines in the chart above were compiled using each company's investor presentations.
The main pipeline that was supposed to bring additional capacity, the Mountain Valley Pipeline, is not expected to come online until the end of 2023, after multiple years of delays. The chart above shows the currently existing and planned egress capacity. There are several different production forecasts, but analysts' general expectation is that Appalachian production will likely stay flat or decline.
The basin's supply base has been growing rapidly for the last ten years and is finally showing signs of depletion or at least slowing production growth.
Recent Infrastructure Announcements
Mountain Valley Pipeline – U.S. pipeline company Equitrans Midstream Corp expects the Mountain Valley natural gas pipeline startup has been delayed to the end of 2023.
The Mountain Valley Pipeline (MVP) project is a natural gas pipeline system that spans approximately 303 miles from northwestern West Virginia to southern Virginia and will bring nearly 2 Bcf/d of takeaway capacity from the Appalachian basin to the mid-Atlantic markets. The pipeline has faced numerous court challenges throughout the life of the project, which is why the project is now two years beyond the original in-service date of 4Q2018.
PennEast Pipeline - Cancelled
Regional Energy Access Pipeline - Williams announced that the Regional Energy Access Pipeline is on track to enter in-service during the fourth quarter of 2024. The 829-MMcf/d pipeline will help serve residential, commercial, and power demand in Pennsylvania, New Jersey, and Maryland.