End to capacity restriction on Texas Eastern, bullish for Northeast gas market

Texas Eastern Transmission on Aug. 4 lifted an extended capacity restriction on its 30-inch line, opening the floodgate for more Appalachian gas to flow southbound to markets in the US Gulf Coast.

In a critical notice published in late July, Texas Eastern said that the Pipeline and Hazardous Materials Safety Administration had completed its engineering-assessment review and granted authorization to resume full operating pressure on its 30-inch system beginning Aug. 4.

The agency's approval restores normal operations along the line's Kosciusko to Uniontown segment, lifting capacity through the Danville compressor station to 1.85 Bcf/d, up from just 1.29 Bcf/d.

The segment previously had been restricted from June 2 after PHMSA declined to renew the pipeline's temporary permit – a requirement that came following Texas Eastern's May 2020 pipeline rupture.

On Aug. 4, gas transmissions through the Danville compressor station jumped roughly 300 MMcf from the prior day to an average 1.66 Bcf/d. Under the PHMSA order, volumes through Danville had averaged just 1.27 Bcf/d from June 2, data compiled by S&P Global Platts Analytics shows.

Flows, prices

The restoration of full capacity on Texas Eastern's 30-inch line should boost southbound flows from Appalachia, tightening supply in the Northeast and potentially lifting gas prices there.

On Aug. 4, southbound gas transmissions from the Northeast jumped about 425 MMcf from the prior day to over 7 Bcf/d. Earlier this month, and prior to the official resumption of full operating pressure on Texas Eastern, southbound flows through Danville hit an eight-week – presumably as the pipeline operator began testing its newly approved capacity.

Northeast-to Southeast transmissions saw a similar gain, briefly rising to over 7 Bcf/d in early August after averaging just 6.5 Bcf/d through most of June and July, Platts Analytics data shows.

On Aug. 4, spot prices at Appalachia's upstream hubs were up sharply. At Columbia Gas, the cash market added about 23 cents on the day to $3.77/MMBtu. At Eastern Gas South, formerly known as Dominion South, prices were up 18 cents to $3.65/MMBtu, preliminary settlement data from S&P Global Platts showed.

Storage

In addition to stronger gas prices, increased demand from the Gulf Coast markets could curtail storage injections in the Northeast over the next several months, especially given current interregional and seasonal price spreads.

At Eastern Gas South, for instance, the cash-market spread to Henry Hub has averaged 90 cents/MMBtu from July 1 to date. Over the same period, the cash-to-winter spread at Eastern Gas has averaged just 41 cents/MMBtu – using the January 2022 contract as a basis for comparison.

On Aug. 4, storage injections in the Northeast were down about 1 Bcf on the day to 2.5 Bcf. Over the past month, injections in the Northeast have averaged just 2.7 Bcf/d – insufficient to narrow the region's lingering inventory deficit.

With less than three months remaining for the current injection season, this summer's build will need to accelerate to about 3.4 Bcf/d through early November to reach typical pre-winter inventory levels at over 1 Tcf, Platts Analytics data shows.