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Texas Eastern explosion, pipeline outage cuts Appalachian gas production, prices

Highlights

Dominion South cash falls 5 cents to $1.51/MMBtu

Marcellus, Utica shale output drops 1 Bcf/d

New York — An explosion and resulting outage on Texas Eastern Transmission began pushing back on Appalachian gas production Tuesday, weakening prices at Dominion South while cutting supply to the US Southeast.

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In midday trading, cash prices at the Appalachian benchmark supply hub were down about 5 cents to $1.51/MMBtu, preliminary data from S&P Global Platts showed.

At nearby Texas Eastern M3, stranded regional supply weighed on an otherwise bullish market, dropping hub prices about a penny to $1.62/MMBtu. At other downstream hubs across the Northeast, prices were sharply higher, up as much as 19 cents Tuesday on an uptick in weather-related demand.

On the US Gulf Coast, the precipitous drop in incoming supply Tuesday was likely to blame – at least in part – for higher prices at key regional locations including Henry Hub, up 16 cents to $1.93/MMBtu, and Houston Ship Channel, up 21.5 cents to $1.90/MMBtu.

Lower prices at select Northeast locations impacted by the outage on Texas Eastern come after an explosion Monday on the pipeline's 30-inch diameter line near the Owingsville, Kentucky compressor station.

The subsequent outage at Owingsville has cut southbound capacity through the compressor to zero, according to a critical notice posted Monday by Texas Eastern. Southbound flows through Owingsville have averaged about 1.3 Bcf/d over the past 30 days, S&P Global Platts Analytics data shows.

With limited capacity to reroute gas on other pipelines flowing to the US Gulf Coast or to the Midwest, stranded Appalachian production came under pressure Tuesday as combined output from the Marcellus and Utica shales dropped about 1 Bcf/d from the start of the week to an estimated 30.6 Bcf/d.

Net gas transmissions from Northeast to the Southeast have also witnessed a steep drop, falling to 3.1 Bcf/d Tuesday, down from an average 4.8 Bcf/d over the 30 days prior.