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Market Monitor – Southeastern US Natural Gas Outlook

mm5316Due to increases in power sector demand for gas, coupled with growing demand from the industrial sector in the region, overall natural gas demand in the Southeastern US is expected to grow by nearly 8 Bcf/d over the next 15 years. All these factors combine to create significant risk of higher natural gas basis prices in the future as demand growth is currently outpacing supply and the required infrastructure improvements are years away.

During the Southeast LDC Gas forum held in Atlanta Georgia in late April, there was considerable discussion around both the growing demand for natural gas in the Southeastern US markets and the needed infrastructure to support it. Driven by power sector demand, overall natural gas demand in the Southeast is expected to grow by nearly 8 Bcf/d over the next 15 years. With much of the growth coming from dispatchable generation, the need for swing volumes will also greatly increase, further exposing a current weakness in the infrastructure within the region.

The increase in gas demand from the power sector is due to a combination of both new generation being built across the US to either replace retiring coal and nuclear generation, or to account for growing demand for energy from the US economy.

The Southeast, which historically has relied heavily on natural gas extracted from offshore wells in the Gulf of Mexico region, will need to build both pipelines and peaking facilities to leverage available resources from further north in order to meet the growing demand for natural gas. One proposal to accomplish this is the Mountain Valley Pipeline a project proposed by a group including FPL. The project would tap into natural gas being extracted from OH and PA and bring it as far south as Virginia, increasing supply into the Mid-Atlantic region, and free up Gulf of Mexico gas for the Sabal Trail pipeline which is proposed to run from central Alabama across Georgia and into central Florida.

All these factors combine to create significant risk of higher prices in the future in the Southeastern US as demand growth is currently outpacing supply and the required infrastructure improvements are years away.

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