Rising Marcellus shale output disrupts US gas prices.

FT: “….The new direction for the Rockies Express shows how pipeline companies are scrambling to keep up with breakthroughs in shale gas drilling. Unlike shale oil, which is booming in North Dakota and Texas, the strongest shale gas growth is in northeastern states.”
“In the Marcellus Shale of Pennsylvania and West Virginia, gas output has climbed 800 per cent to 16bn cubic feet per day from November 2009, the month Rockies Express opened. The adjacent Utica shale of Ohio has grown at the same rate to a more modest 1.5bn cu ft/d, according to the Energy Information Administration.
Even as new supplies bring calm to gas futures markets, conditions in the northeast are anything but. Spot gas at the Dominion South trading hub in Pennsylvania has plunged 60 per cent in the last six months, compared with a 13 per cent fall in benchmark prices.
Pipeline developers now propose to funnel the emerging glut of northeast shale gas elsewhere. If they succeed, drilling companies, consumers such as power plants and would-be exporters of liquefied natural gas (LNG) will feel the effects.
Traditionally, pipelines have carried gas from the energy-rich Gulf of Mexico coast to the populous, gas-short regions of the north. One is the Texas Eastern Transmission (Tetco) pipeline, which travels from its namesake state to the New York metropolitan area.
….These imminent projects are the tip of the iceberg. The Williams companies’ “Atlantic Sunrise” project, proposed to open in 2017, would take 1.7bn cu ft per day of Marcellus gas as far south as Georgia and Alabama. Energy Transfer Partners, another company, seeks to build a 3.25bn cu ft/d pipeline named “Rover” from the Marcellus and Utica shales to the central US Midwest and Ontario, Canada.
Even as gas flows south, the price discount – known as “basis” in commodity markets – between the northeast and Henry hub will remain about $1, or roughly the pipeline tariffs, Morgan Stanley says in a note. This continuing weakness adds pressure on Marcellus gas markets and producers such as Cabot Oil & Gas, Eclipse Resources, EQT, Range Resources and Southwestern Energy, the bank says, and has cut share price targets for the companies.
Other factors favour Henry hub’s continued relevance. For example, gas exported from Cheniere Energy’s new liquefaction terminal under construction at Sabine Pass, Louisiana, will be set based on the Henry market.”