Upcoming maintenance on Algonquin Gas Transmission could put upward pressure on New England gas prices through early July as a sequence of brief, but severe flow restrictions limit downstream supply.
Over the past month, pipeline operator Spectra Energy has posted a series of increasingly restrictive updates to its outage schedule, fueling an increasingly bullish outlook for early summer gas prices.Since the start of April, forwards prices at Algonquin city-gates are up sharply for the calendar months of May and June, when most of the system's integrity assessments and tool runs are scheduled.
At $2.24/MMBtu, forward gas prices for May are up 27 cents, or about 14%, over the past three weeks. Over the same period, prices for June have climbed 35 cents, or almost 17%, to $2.47/MMBtu, S&P Global Platts' most recently published M2MS data shows.
Historically, maintenance-related throughput and pressure reductions on Algonquin are common during the spring shoulder season when lower demand is more accommodating. Compared to last year, though, flow reductions are currently looking more restrictive for the 2021 maintenance season.
Flow restrictionsThe most severe and consequential maintenance work on Algonquin this spring will likely occur at the Cromwell compressor station in Connecticut, according to an analysis by S&P Global Platts Analytics.
From April 22 through July 5, operationally available capacity at Cromwell is expected to average 1.06 Bcf/d, or about 120 MMcf/d more restrictive than last summer, the analysis shows.
In 2020, flows through Cromwell averaged just 578 MMcf/d, or about 49% utilization in the late-April to early-July period. Similar low-utilization rates were recorded at other key compressor stations last year and could be widely expected again this spring.
While flows on Algonquin's system are generally permissive of capacity reductions during the shoulder season, at least two such restrictions last spring impacted the downstream market. In late April and again in late May, flow limits at the Stony Point compressor station in New York pushed city-gate gas prices up by 40 to 45 cents/MMBtu, or as much as 33%, S&P Global Platts data shows.
Upstream maintenanceOver the next four to six weeks, separate upstream-maintenance work in the Appalachian Basin, some of it unannounced, could further limit available supply in the neighboring New England gas market.
At hubs along the northeastern Atlantic Seaboard, and particularly for those in New England, the combined price impact of the simultaneous maintenances could be pronounced.
Earlier this month, unannounced maintenance on gathering lines and at processing plants was likely to blame for a decline in production receipts on Equitrans and Texas Eastern Transmission, according to Platts Analytics. During the impacted period, Appalachian production fell as much as 1 Bcf/d.
In addition to potential, unannounced maintenance work this spring, Transcontinental Gas Pipe Line plans to begin a separate, month-long outage on its Leidy Line in May. The work is slated to cut westbound deliveries to National Fuel Gas Supply and Dominion Transmission to zero for the duration of the outage.
With limited capacity to reshuffle displaced volumes eastbound along Transco, production may need to pull back to accommodate constraints, potentially cutting receipts in May by about 500-600 MMcf/d, according to Platts Analytics.
