Friday, December 16, 2011

EIA: Market Changes Contribute to Growing Marcellus Area Spot Natural Gas Trading

Marcellus-area spot natural gas trading (InterContinentalExchange (ICE) day-ahead transactions) has more than doubled from under 1 billion cubic feet per day (Bcfd) to almost 2 Bcfd on average since 2005 (see chart). The largest gains in Marcellus area trading volumes were at the Tetco M3 trading point, up 178% to 0.5 Bcfd and at the Dominion South trading point, up 168% to 0.7 Bcfd since 2005. Key factors likely contributing to increased natural gas spot trading in the Marcellus area include: rapid increases in Marcellus shale gas production; direct deliveries of Wyoming gas to the Ohio/Pennsylvania border through the Rockies Express Pipeline; and increased use of natural gas for power generation.

graph of Spot annual natural gas traded in the marcellus area, 2005-2011, as described in the article text
Source: U.S. Energy Information Administration, based on Ventyx's Energy Velocity Suite.
Note: New Marcellus in the graph includes the Leidy, TGP 219, TGP 313, and TGP Zone 4 Marcellus trading points. 2011 includes data through November.

 Several factors are likely contributing to increased natural gas spot trading in the Marcellus area:
  • Marcellus production gains. Bentek Energy, LLC estimates that Marcellus natural gas production now exceeds 4 Bcfd, up significantly in recent years.
  • New trading points. In addition to several new Marcellus production area trading points, the extension of the Rockies Express Pipeline (REX) to Clarington, Ohio led to new natural gas trading points formed to facilitate commercial transactions. REX deliveries to Clarington, Ohio averaged over 1 Bcfd from January through December of 2011.
  • Greater reliance on natural gas for electricity generation. Falling natural gas prices coupled with historically high spot coal prices created incentives for generators to use more natural gas to fuel their plants. Pennsylvania is one state that has seen significant growth in natural gas-fired electric generation.
map of Marcellus area spot natural gas trading points, as described in the article text
Source: U.S. Energy Information Administration, based on Ventyx's Energy Velocity Suite. 

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