Eastern Gas (formerly Dominion) South Prices have trended higher over the past few months as supply fell and egress constraints eased.
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
September 16, 2024 - Since mid-summer, prices have steadily moved higher in both the prompt month and further down the curve. The rolling prompt contract has climbed from a low of $-1.07/MMBtu in June to $-0.80/MMBtu more recently. Meanwhile, the rest of the curve has shifted higher as well.
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 pipeline capacity out of Appalachia. With MVP flowing more than 1 Bcf/d, egress has improved, supporting basis pricing.
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.
Mountain Valley Pipeline, which started up this summer, is now flowing about 1 Bcf/d onto Transco. This may be the last big pipeline project out of the Northeast for some time.
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.