Locator: 50655ARCHIVES.
We’ve blogged about rising demand for natural gas in the southeastern U.S. and several of the pipeline projects being planned to deliver more gas to that fast-growing region. But there’s more to the story — a bigger picture — namely, that gas consumers in Florida and other states pulling gas east through Mississippi increasingly find themselves competing for supply with LNG exporters. In today’s RBN blog, we begin a two-part series on Southeast gas demand, new pipeline capacity to and through the region, and why the gas flowing there is priced higher than Henry Hub.
Ask your favorite chatbot which states are in the southeastern U.S. and you’ll get a long list — generally, everything within the huge triangle formed by the Virginias, Florida and Louisiana. The Southeastern Conference (SEC) of the NCAA includes Oklahoma, Missouri, Kentucky and two universities in Texas (one of which we like!). But for our purposes, we’re zeroing in on the southeasternmost swath: from west to east, Mississippi, Alabama, Florida, Georgia and South Carolina. While these five states account for only 0.4% (~ 400 MMcf/d) of total U.S. natural gas production, their share of U.S. gas consumption is 30X higher — about 12% or 11 Bcf/d — mostly due to their heavy (and growing) reliance on gas-fired power generation and (especially in Alabama, Georgia and Mississippi) a lot of industrial demand too.
Gas-demand growth in the region has been coming on fast and furious over the past few years, stressing the legacy gas pipeline networks there and resulting in the SONAT (Southern Natural), Florida Zone 3 and Transco Zone 4 price trading points — primary indicators of gas prices in our five-state focus area — being among the very few points where gas is priced at a premium to Henry Hub. [Figure 1 below shows April first-of-month (FOM) differentials — the green-shaded circles indicate trading points where the FOM differential is a premium to Henry.]
