Houston — Several major US natural gas buyers said Wednesday they face challengesprocuring supplies to meet demand in downstream markets such as theMid-Atlantic and Southeast due to competition for the resources fromshippers to Mexico and LNG export players. Insufficient Northeastpipeline infrastructure was cited as another problem.
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The comments during the final day of the LDC Gas Forums Northeastconference in Boston highlight the changing dynamics of gas flows and newglobal markets that are being opened up by technology that is makingdrilling more efficient.
As a result, gas buyers said they are more acutely aware of the need tolock in long-term firm transportation, tap storage when available, andadjust their hedging strategies to deal with price volatility that isoften driven by system bottlenecks.
"The Southeast is now a net importer. We have transitioned from a supplyzone to a market zone," Jeff Avery, director of natural gas at theTennessee Valley Authority, told attendees at the conference. "With thatchange, we want to take some of the risk off the table."
TVA, which provides electricity for business customers and local powercompanies serving nine million people in parts of seven Southeast states,has been diversifying its portfolio in recent years to give it moreoptions for fuel. But natural gas is an important piece, especially as abridge fuel for increasing use of renewables.
With the Appalachian Basin being a key supply zone, producers have beeneager to move more supplies to the Southeast, and they have beenencouraging midstream operators to add more takeaway capacity.
"With the influence of LNG export growth as well as the Mexico demand,being in the area where TVA is, they are now a very sizable competitor ofours for gas molecules," Avery said.
In its annual statistical review of world energy, BP said Wednesday thatLNG exports, in particular, are altering gas markets because they havegreater mobility due to destination flexibility in response to pricesignals.
While there have been a number of new pipelines that have come online inthe Northeast, with others under construction, gas buyers said much moreis needed. That means pushing state and federal regulators to speed upthe permitting process, they said.
"The main focus is to have available, low-cost supplies," John Tammaro,manager of gas supply administration for National Fuel Gas Distribution,said at the conference. "We're fortunate to be in an area that I call thenew Gulf of Mexico -- that's the Marcellus and Utica shale."
At the same time, Tammaro said his company is concerned with how naturalgas is viewed by decision-makers, including the Federal Energy RegulatoryCommission. "The FERC and the states combined are two hurdles we alwayshave to address," he said.
Pricing also is in the mix for gas buyers looking for sufficient suppliesover the long term, according to Avery.
"I do love low pricing, but I also want a healthy producer base," Averysaid. "I do think a stable pricing environment is very important in theindustry, instead of these ups and downs and wild swings." --Harry Weber, Harry.Weber@spglobal.com
--Edited by Richard Rubin, email@example.com