Dive Brief:
- Despite projections for a milder winter, natural gas supply constraints mean prices will remain high in demand centers like Boston and New York City, according to the U.S. Energy Information Administration.
- Average forward prices in Boston this winter are expected to be $13.70/MMBtu. That's more than $2/MMBtu lower than last winter, EIA noted, but still significantly higher than previous winter seasons.
- A lack of pipeline capacity moving Marcellus Shale gas to Boston has contributed to the higher prices, along with flagging production from eastern Canada and insufficient liquefied natural gas (LNG) imports.
Dive Insight:
The gas industry is scrambling to build more pipeline capacity, but response in the Northeast has thus far lagged the growing reliance.
"Despite expectations of a milder winter for 2014, marketers anticipate high prices for natural gas in Boston and New York City," EIA said. Natural gas prices are expected to be lower than last winter, the agency explained, but higher than the average of previous winters, particularly in Boston.
"Higher natural gas prices are partly because the pipeline industry has not added any new capacity to flow more Marcellus gas into Boston and because production from eastern Canada and [LNG] from the Everett (Boston) and Canaport (New Brunswick) terminals are not high enough to serve New England peak demand," EIA said.
Forward prices for New York City for the winters of 2014-15 and 2015-16 are "significantly lower" than the spot prices for the unusually cold winter of 2013-14, but EIA said "the forward prices are still slightly higher than the spot prices for the 2012-13 winter, even though several pipeline expansion projects within the past two years have added new capacity to flow more natural gas from the Marcellus region into New York City."
Since the beginning of 2014, the pipeline industry has added 2 Bcf/d of capacity in the Northeast and plans to add another 0.4 Bcf/d by the end of 2014.