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Southeast's growing appetite for natural gas will change market structure

Althougha 4.2 Bcf/d increase in natural gas demand in the Southeast expected over the next15 years may not sound significant, it will "change the structure of the Southeastmarket as we know it today," said Anupam Das, a market analytics manager atNextEra Energy Resources LLC.

The Southeast,considered here as Virginia, Tennessee, North Carolina, South Carolina, Florida,Georgia and Alabama, accounted for about 11.6 Bcf/d of gas demand in 2015 or one-sixthof the national demand. More than 50% of the natural gas supply to the Southeastcomes from the neighboring Gulf region.

But theGulf region will see the largest increase in demand over the next 15 years, andby 2030, with 60% of the Southeast's generation stack expected to be natural gasfired, "capacity planners are going to have a very interesting time,"Das said during a presentation at the LDC Natural Gas Forum Southeast in Atlantaearlier this month.

The Southeastleads the entire nation in the migration of generation from the coal stack to thegas stack. Since 2010 the region has retired 14 GW of coal plants, and another 8GW of coal generation is expected to retire between 2015 and 2030. Most of the replacementgeneration will be gas fired. "By 2030 the region will need 50 GW of gas firedgeneration to meet retiring coal demand along with the regional demand growth,"Das said. "This will cause the winter and summer peaks to grow at differentrates."

"Capacityplanners in the southeast are probably more focused on peak availability of gasconsidering the seasonal nature of the market; add to the fact the region has noin ground storage except at the very west end of Alabama, the capacity plannershave to rely on spare capacity coming into the region and line pack to meet thehuge swing in demand," Das said.

It isestimated that by 2030 the Southeast will have about 2.1 Bcf/d more of electricgeneration demand on the already peaking winter markets. By summer, the August numberwould be about 3.7 Bcf/d higher.

The swingvolume that capacity planners have to manage currently is about 4.9 Bcf/d. By 2030that will grow to about 5.8 Bcf/d, "so we are going to have to find about 1Bcf/d of swing capacity in a market that is essentially served by a single pipe,"Das said.

Traditionallyabout 50% of the gas consumed in the Southeast came from the Gulf Coast and theMidcontinent. Gas flowed from those regions into the Southeast and spare capacitywould flow on to the Mid-Atlantic and beyond. In 2015 the first signs of a changein the flow pattern were witnessed when flow reversed at Station 180 on the TranscontinentalGas Pipeline from the traditional south to north flow to a north to south flow.

"Ifyou consider where the supply source is for this area, this is probably a good thing,"Das said. "The supply traditionally used to serve the Southeast market is goingto see increasing competition from native demand there, so you quite possibly haveto pay more to get the gas to the Southeast market."

Thatis why Juno Beach, Fla.-based NextEraEnergy Inc. is backing the Mountain Valley Pipeline project, Das said."Having a different supply source will be a very good economic advantage especiallyif you consider that the Gulf Coast price may rise."

The MVPproject, an about 300 mile long pipeline that will originate at the Mobley areain Wetzel Co., W.Va., and terminate at Transco Zone 5, Station 165 in PittsylvaniaCo., Va., is expected to remain on track for an online date in 2018-2019 bringing2 Bcf/d of new supply to consumers in the Southeast.

Factoringin the 4.2 Bcf/d of new demand growth to the existing 6.5 Bcf /d of demand in theSoutheast, the 5.8 Bcf/d of supply from new projects including MVP, 'sAtlantic Sunrise (1.7 Bcf/d) and Leidy Southeast (0.6 Bcf/d) and 's Atlantic CoastProject (1.5 Bcf/d), will still leave the region in need of an additional 5 Bcf/dfrom the Gulf Coast.

"Costswill probably be higher," Das said.