The U.S. natural gas market is primed for supply growth. The Lower 48 supply-demand balance is the most bullish it has been in years. Exports are at record levels and poised to increase with additional terminal expansions on the horizon, while international prices have recently notched record highs. Henry Hub gas futures prices are at the highest in over a decade. So, producers will unleash a torrent of natural gas, triggering a midstream build-out like we’ve seen in the past, right? Not so fast. The world has changed. For additional capacity to be built, you need producers or utilities to commit to use it. But Wall Street has drawn a hard line when it comes to capital and environmental discipline in the energy industry and regulatory approvals can also be an uphill battle. Therein lies the conundrum. More midstream capacity is needed for production to grow, but it’s harder than ever for that infrastructure to get built, which means constraints for some period of time are all but a certainty. Natural gas may not be as constrained as crude oil, but it is already butting up against capacity in parts of the Permian and Marcellus/Utica. And in the crude-focused Permian, those gas constraints will also cascade to crude production. In today’s RBN blog, we consider the implications of the new world order.
Up Around the Bend – Midstream Conundrum Threatens Gas Production Growth Long Term
