EIA: Marcellus gas prices could drop below Henry Hub benchmark - WOWK 13 Charleston, Huntington WV News, Weather, Sports

EIA: Marcellus gas prices could drop below Henry Hub benchmark

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Prices of natural gas produced from the Marcellus Shale region could drop below the benchmark Henry Hub price early next year, a new report from the Energy Information Administration says.

Growth in production from the Marcellus region of Pennsylvania, West Virginia, and Ohio has lowered the spot price of natural gas at the TCO Appalachia trading point in recent years. Forward market prices for natural gas indicate that this production growth will continue, the EIA says.

The Henry Hub price point is located at Erath, La. A common way to express prices at different locations across North America is the difference (often called basis) between the price at a particular location and the price at Henry Hub, according to the EIA.

Natural gas prices in the Mid-Atlantic have traditionally been more expensive than Henry Hub, reflecting the cost of moving natural gas from the production in the Gulf region to consumers along the east coast. Increased production from the Marcellus region began changing that relationship in 2011, the EIA says.

Natural gas production in the Northeast has grown by about 3.2 billion cubic feet per day (Bcf/d) so far in 2013, a 30 percent increase from the same period last year. Total natural gas production in this region reached 12.2 Bcf/d in August, a 4.1-Bcf/d increase from August 2012 and a 2.5-Bcf/d increase from the end of last year.

Growth is mostly from dry gas production in northeastern Pennsylvania. That coincides with infrastructure improvements in the region, as gathering lines and pipeline capacity expansions have helped flow more gas to market, according to the EIA. Production in West Virginia reached 2.4 Bcf/d in August, which is 0.8 Bcf/d above the August 2012 level, with 0.6 Bcf/d of that growth occurring in 2013. The liquids-rich areas of the state experienced the most growth as a result of the beginning of operations at two new natural gas processing facilities — the Mobley (Wetzel County) and Natrium (Marshall County) plants — and the expansion of several existing plants, according to the EIA.