Maintenance weighs on Appalachian gas production, prices

Appalachian Basin gas production and prices could be expected to rebound heading into early July following recent downward pressure from pipeline maintenance on several key egress corridors.

Over the past 10 days, Northeast gas production is down about 900 MMcf/d, or about 2.5% owing principally to recent maintenance on Mountain Valley Pipeline. Additional pipeline maintenance on Columbia Gas Transmission, though, has also weighed on regional gas production and prices.

On June 26, Appalachian Basin gas production was up about 250 MMcf on the day to 36 Bcf/d, according to the most recent data from S&P Global Commodity Insights.

On June 24, Mountain Valley Pipeline issued a critical notice in the late afternoon advising customers of a planned service outage with immediate effect through gas day June 26.

According to the pipeline operator, the outage cut transmission capacity on MVP to just 1.25 Bcf/d – down from the pipeline's nameplate 2 Bcf/d flow capacity. The reduction was scheduled to allow pigging operations between the Mobley Run interconnection and the Bradshaw compressor station.

In addition to the work on MVP, flows on Columbia Gas have also been restricted by two separate pipeline maintenance events on Line 10110 and Cobb Line H MA18. Although the former was not expected to impact firm nominations, the latter maintenance reduced total line capacity to zero for gas day June 25, according to two separate critical notices issued by the pipeline operator.

Prices

Beyond the impact on production, Appalachian Basin gas prices have also taken a hit recently, likely due to pressure from additional supply left stranded in the basin.

At Appalachia's benchmark upstream hub, Eastern Gas South, cash prices are down about 35 cents, or over 13%, in the past two trading days to around $2.30/MMBtu, data from Intercontinental Exchange and Platts showed. Platts is a part of S&P Global Commodity Insights.

Over the same period, basis prices have weakened by almost as much, reflecting a widening spread between the Appalachian gas price and the US benchmark Henry Hub.

As pipeline maintenance wraps up, Northeast gas production could be expected to rebound over the days ahead. In the 30 days prior to the maintenance, Appalachian Basin gas production had been averaging about 36.5 Bcf/d, according to data from Commodity Insights.

With milder summer weather on the horizon, gas prices at Eastern Gas South are less certain. In the forward market, traders are pricing in continued weakness with the balance-of-June contract settling most recently at $2.22 and July at just $2.18, Platts M2MS forward data showed.