Appalachian Basin gas takeaway capacity rises as Mountain Valley Pipeline enters service

The long-awaited Mountain Valley Pipeline entered service June 14, offering 2 Bcf/d of natural gas transit capacity from the Appalachian Basin to demand centers in the Mid-Atlantic and Southeast, operator Equitrans Midstream said.

"MVP is now available for interruptible or short-term firm transportation service until long-term firm capacity obligations commence on July 1, 2024," Equitrans said in a statement. The Federal Energy Regulatory Commission authorized the project's startup June 11 (CP16-10).

The 42-inch pipeline, which begins in Wetzel Country, West Virginia, will be able to deliver up to 2 Bcf/d of Appalachian Basin gas to an interconnect with Transco at compressor station 165 in Virginia.

No flows were observed from MVP into the Cherrystone point on Transco June 14, according to Williams informational posts. But the pipeline has firm capacity agreements for around 376,000 Dt/d for June 15-30, according to informational posts on the MVP website.

EQT holds 300,00 Dt/d of this capacity and BP holds 50,000 Dt/d, while the rest is held by Tenasaka Marketing Ventures, Duke Energy Carolinas and Roanoke Gas.

"Demand for natural gas in Southwest Virginia continues to grow, and the importance of MVP's energy supply cannot be overstated," said Paul Nester, Roanoke Gas CEO, in a statement.

EQT is also the main long-term capacity holder with around 1.16 Bcf/d, according to an April 30 FERC filing. The other long-term capacity holders are ConEd, Dominion, WGL Midstream, Public Service Company of North Carolina and Roanoke Gas.

EQT is in the process of acquiring Equitrans, a development which CEO Toby Rice says will reduce breakeven costs and allow it to sell more volumes unhedged, increasing returns when gas prices rise.

Equitrans Expansion Project

The remaining facilities at the Equitrans Expansion Project also began service June 14, Equitrans said in a separate FERC filing (CP16-13).

The project increases north-to-south capacity on the Equitrans mainline system in central Appalachia by 600 MMCf/d, and includes an interconnect to MVP in Wetzel County.

Most of the facilities were placed in service in 2019, but Equitrans has now also placed the facilities directly associated with deliveries of natural gas to the Mountain Valley Pipeline into service.

"MVP is designed to provide cost effective access to natural gas for use by local distribution companies, industrial users, and power generation facilities in the growing demand markets of the mid-Atlantic and Southeast regions of the United States," Equitrans said.

Transco Zone 5 typically trades at a premium to Henry Hub, while the Appalachian Basin's benchmark trading location, Eastern Gas South, is typically at a discount.

On the forwards market, the Eastern Gas South July contract was at a 91 cents/MMBtu discount to Henry Hub June 13, while Transco Zone 5 was at a 22 cents/MMBtu basis premium, Platts M2MS data showed June 13. Platts is part of S&P Global Commodity Insights.

While MVP is expected to gradually boost Appalachian Basin production, its immediate effect might be muted. Upstream companies have reduced output in the region in response to weak prices. Northeast production has averaged 34.5 Bcf/d June 1-14, around 700 MMcf/d lower than the same period of 2023, Commodity Insights data showed.

"We estimate spare capacity levels out of the Northeast of about 2.9 Bcf/d, compared to a previous five-year average of 0.7 Bcf/d," Commodity Insights gas analyst Olivia Arcuri wrote June 12.