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Northeast gas production, pipelines threatened by Hurricane Florence

Highlights

Most significant impact seen from flood waters

Florence is one of five active tropical systems

Houston — Appalachian gas producers, pipelines and other midstream companies are bracing for the impact of Hurricane Florence, which could result in the loss of up to 2 Bcf/d in supplies from the region over the next several days, according to Platts Analytics estimates.

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PRODUCTION IMPACTS

The hurricane, which is expected to slam into the East Coast early Friday as a Category 4 or 5 storm, could continue inland into the heart of the Appalachian producing region, where it would drench the area with heavy rains, possibly leading to flooding and production shut-ins.

According to the National Hurricane Center, Florence is expected to produce total rainfall accumulations of 15 to 20 inches with isolated maximum amounts up to 30 inches near the storm's track over portions of the Carolinas and Mid-Atlantic states from late this week into early next week.

This rainfall could produce catastrophic flash flooding and significant river flooding, the Hurricane Center said.

In Pennsylvania, the four major gas-producing reporting areas -- the Northeast Dry, Central Dry, South Dry and Southwest Wet -- are within the potential path of Florence, according to Platts Analytics. These areas drive US Northeast production, accounting for more than 17 Bcf/d of a total of 29 Bcf/d in the region. The last hurricane to strike the Mid-Atlantic and take a bite out of Northeast production was Matthew, which made landfall as a Category 1 storm over South Carolina in late-September 2016. From September 1 through 25, Northeast sample production averaged 22.3 Bcf/d, but it fell by 1 Bcf/d from September 26 through October 15, and struggled to completely recover from losses by the end of October, according to Platts Analytics data.

INTERSTATE PIPELINE PROJECTS

The storm could also impact future supply flows out of the region by delaying the startup of several interstate pipeline expansions now under construction.

For example, Florence could push back the start date for the full capacity of Williams' Atlantic Sunrise expansion of the Transcontinental Gas Pipe Line system, currently set for September 17.

The pipeline, which is currently flowing at 550 MMcf/d, will be able to flow 1.7 Bcf/d when fully in service.

In an email statement Tuesday, Williams spokesman Chris Stockton said the company was "diligently making necessary preparations for the storm."

Energy Transfer Partners could also face some delays in making repairs to its Revolution gathering system, following a pipeline explosion Monday morning on the system located in Beaver County, Pennsylvania. According to preliminary statements from ETP, the explosion could have been caused by a landslide due to heavy rains and ground subsidence.

In the longer term, excessive rain from Florence will likely add to weather-related construction delays on TransCanada's Mountaineer XPress project, part of its Columbia Gas Transmission system. TransCanada is targeting startup by the end of the year on the 2.7 Bcf/d project.

Construction already has been hampered by continued rainfall along the construction path. S&P Global Platts estimates that Mountaineer XPress will enter service during first quarter of 2019.

LNG TERMINALS

Depending on its path, Florence also could disrupt operations at the two LNG export terminals on the East Coast. Dominion Energy, which owns the LNG terminal in Cove Point, Maryland, has "activated its severe weather preparation and response plan in anticipation of high winds and heavy rain expected this week," the company said in a statement Tuesday.

"The company is maintaining close communications with local, state and federal emergency preparedness agencies and with the nearby Calvert Cliffs Nuclear Power Plant control room," Dominion said.

In addition, Kinder Morgan, which owns the Elba Island LNG Terminal in Georgia, said while it is continuing to monitor Hurricane Florence, the LNG terminal and related assets remain fully operational. The company was activating its hurricane preparedness plans, which include securing certain assets in the direct projected path of the storm, primarily in the Carolinas, Virginia and Maryland. "As a precaution, the facilities along the path of the storm that are likely to experience partial or temporary shutdowns during the storm include the liquids and bulk terminals along the coasts of South Carolina, North Carolina, Virginia and Maryland."

In addition to the LNG terminal, assets in the area that remain fully operational include Elba Express pipeline, Southern Natural Gas (SNG) system and the Plantation Pipe Line system, Kinder Morgan said.

LITTLE PRICE IMPACT

So far the storm has had little impact on natural gas prices, according to Platts data. In Tuesday's trading in the Appalachian region, Dominion North was down 4 cents to $2.33/MMBtu, and in the Northeast, Iroquois Zone 2 rose 1 cent to $2.93/MMBtu. Algonquin city-gates gained 2 cents to $2.85/MMBtu.

Transco Zone 5 delivered -- a pricing point in North Carolina that would most likely see the first impacts from Florence -- was up by only about 2 cents to trade at $3/MMBtu. That figure is an 11-cent premium to Henry Hub, which was trading at $2.89/MMBtu.

Hurricane Florence is not the only storm to potentially affect gas supply and demand fundamentals. The Atlantic hurricane season almost overnight has shifted into high gear, with five tropical systems, including Florence and a disturbance in the Gulf of Mexico, that could affect production later this week.

-- Jim Magill, jim.magill@spglobal.com;

-- Grant Gunter, newsdesk@spglobal.com

-- John DeLapp, newsdesk@spglobal.com

-- Edited by Christopher Newkumet, newsdesk@spglobal.com