Appalachia Gas Price and Fundamentals

Eastern Gas (formerly Dominion) South Prices have been relatively subdued this summer amid continued weakness in Northeast fundamentals.

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. 

• (July 24, 2024) EQT will continue to keep some production curtailed into the second half of the year. After cutting output by about 1 Bcf/d in February, EQT announced they will keep about 0.5 Bcf/d curtailed. EQT's CFO described the move as a response to market fundamentals and noted the large storage surplus in Northeast inventories.
• (June 11, 2024) Transco requests approval to bring another 160 MMcf/d of capacity online by July 1 on the Regional Energy Access expansion, connecting supply to demand centers in the Northeast. The expansion is expected to be fully operational by Q4 2024.
• (June 10, 2024) Mountain Valley Pipeline has requested FERC approval to commence commercial operations on June 11, 2024, with the project mechanically complete and final segments being purged and packed with gas.
• (June 4, 2024)  Northeast production is showing signs of recovery after a weak start to summer. Some have speculated thar EQT is returning some curtailed volumes to the market, in advance of higher power sector gas demand and the startup of MVP. 
• (May 7, 2024) On May 1, a rupture occurred during hydrostatic testing of the Mountain Valley Pipeline, potentially delaying its operational start
• (May 1, 2024) DT Midstream announced an expansion of the Stonewall gas gathering system, increasing its capacity and adding a new interconnect with the soon-to-be-operational Mountain Valley pipeline, to enhance its 68-mile, 1.5 Bcf/d pipeline and support mid-Atlantic market growth driven by data center and AI demand
• (April 12, 2024) Texas Eastern (TETCO) maintenance hinders the Northeast’s ability to shed its inventory surplus
  • April 2024: Outage from Gladeville to Athens impacts flow; Gladeville station outflows are 100 MMcf/d less than in April 2023 and March 2024, with station utilization at 81% up to April 11, compared to 93% in April 2023.
  • April 15-23, 2024: Hanover Lease station's capacity reduced to 300 MMcf/d, down from over 500 MMcf/d early April.
  • April 26-May 25, 2024: TETCO’s Line 40-G VS4 is set to see a 21-day outage starting during the 30-day window from April 26-May 25. Enbridge says “the outage duration of 12 days may be extended due to unforeseen issues such as pipeline conditions or sea/weather conditions."
• (February 21, 2024) Equitrans delayed the 2 Bcf/d Mountain Valley Pipeline startup from late 1Q 2024 to 2Q 2024, with completion targeted by May 31, 2024, due to unforeseen construction challenges and severe winter weather
• (January 17, 2024) The January 2024 EIA report forecasts Appalachia's natural gas production will see the largest drop among U.S. shale regions, decreasing by 159 MMcf/d from January to February.

Price

July 31, 2024 - Over the past several weeks, prompt Eastern Gas basis prices been trading in a range between $-0.90/MMBtu and $-0.70/MMBtu, meanwhile Summer '25 prices have rallied back to levels last seen early this year. Winter '24/'25 prices have remained mostly stable.

Appalachian production has fallen in 2024, driven by a combination of seasonal declines and producers shutting in wells due to weak pricing. EQT, one of the largest producers in the region, has taken 1 Bcf/d offline until the pricing environment improves. Production bounced back in late May and early June, which has correlated with deteriorating basis prices and lower egress capacity.

Another factor affecting pricing in the region is the recent startup of the Mountain Valley Pipeline, which has opened up egress capacity out of Appalachia.

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. 

Market Influences 

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 – The pipe will begin filling with gas this month (June 2024) and is expected to start commercial service as well. 

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 its life, which is why it is now two years beyond the original in-service date of 4Q2018. MVP will not flow at full capacity until downstream constraints on the Transcontinental pipeline are alleviated over the next few years. 

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.