Thanks to new pipelines and technological advances, producers in the Northeast can now tailor their output to the rise and fall of gas prices. Production from the region’s Marcellus and Utica basins appears to lag price moves at key regional hub Dominion South by three days, according to Bloomberg New Energy Finance research. In 2015, no correlation was seen between the hub and output.
Six months after Northeast gas prices plunged to a record low as pipeline bottlenecks left supplies trapped in the region, new links like Spectra Energy Corp.’s Algonquin Incremental Market project are allowing drillers including Antero Resources Corp. and Range Resources Corp. to send their production to different markets in response to regional price moves. Meanwhile, remote-controlled well heads make it possible for explorers to fine-tune output. The developments may help producers prevent another supply glut.
Responsiveness to prices is “just one more lever that the market can pull to make sure things balance,” Het Shah, an analyst at Bloomberg New Energy Finance, said by phone. In a matter of weeks, producers “were able to swing from dropping overall production in that area by 1.5 billion cubic feet to bringing it all back online.”
Producers have perfected the art of choking wells, or restricting initial output, Shah said. Computer control of wells has allowed producers to remotely expand or cut production, a practice that used to be done manually by adjusting a well’s diameter.
“Field technology has gotten a lot better and I think the companies have invested a lot in it” since last year’s energy price rout, James Sullivan, an analyst at Alembic Global Advisors in New York, said by phone. That’s given those producers “the ability to be a little more responsive” by allowing them to “sell to multiple price points.”