Natural gas producer Southwestern Energy added 140mn cf/d of pipeline takeaway capacity
The additional capacity on Tennessee Gas pipeline and Millennium pipeline brings Southwestern's total firm capacity in northeast Appalachia, its key operating area, to more than 1.4 Bcf/d (40mn m?/d). The company acquired the capacity for about 10/1,000 cf, well below its average rate of about 26/1,000 cf.
"Our strategy has been to assure flow out of that region," Bill Way, Southwestern's chief executive said during a conference call to discuss the company's second quarter results.
The northeast US, home to the prolific Marcellus and Utica shales, suffers from a lack of infrastructure that could limit gas output from that region. Several large pipeline projects are scheduled to come on line in the next few years. But regulatory hurdles have delayed projects like the 3.25 Bcf/d Rover pipeline, which aims to take gas from the northeast into Canadian and midcontinent markets.
Federal regulators in May stopped some construction on the $4bn Rover project following a spill of drilling fluids. The first phase of Rover should begin in "late summer," project developer Energy Transfer Partners said. Startup was scheduled for July after a longer-than-expected regulatory process.
Southwestern owns 200mn cf/d of firm transportation on phase two of Rover, which is still scheduled to come online by the end of this year.
Southwestern's new capacity increases its exposure to Dominion South pricing. More than half of the company's northeast Appalachian production is indexed at Dominion prices. Dominion South prices in July traded at an average discount to the Henry Hub of 99?/mmBtu, narrowing from $1.38/mmBtu a year earlier.