While all eyes have been on Energy Transfer’s Rover pipeline project as it is slated to startup sometime this month adding material new takeaway capacity, Northeast production has already begun to surge even prior to its startup. New highs have recently been reached in Appalachia, with dry production exceeding 23.6 Bcf/d based on the pipeline flow sample, an increase of about 1 Bcf/d from the end of May. Is this just the beginning of a flood of new gas from Appalachia to hit the US market as critical new pipeline projects finally come to fruition over the next six months?

The recent increase has come entirely from Western Appalachia including Western Pennsylvania, West Virginia and Ohio, while Eastern Appalachia has remained fairly flat year-to-date, as seen in the figure below.

Eastern Appalachia still remains bottlenecked until new pipeline takeaway capacity comes online. However in Western Appalachia, about 1.2 Bcf/d of incremental pipeline takeaway capacity came online in the fourth quarter of 2016, including the first phase of the TETCO Gulf Markets project, Dominion’s Lebanon West II and the REX Zone 3 Expansion project. Although this capacity came online at the end of last year, total production in the region did not immediately increase to fill this incremental capacity, and in fact has just recently grown enough to backfill the additional capacity. This has been reflected in the recent weakness in Dominion South Basis, which fell an average of $0.57 from May to June, as seen in the following figure.


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