Limited takeaway capacity plagues Northeast natural gas liquids market

As additional natural gas liquids (NGL) takeaway capacity is delayed in the Northeast due to the temporary shutdown of Mariner East 1 and the delay in completing Mariner East 2, midstream NGL players will become increasingly constrained, creating a ceiling for wet gas production and putting downward pressure on earnings for the operators in the region, reports East Daley Capital Advisors Inc., an energy information and insights provider.

“The NGL market in the Northeast continues to be a logistical quagmire for producers, midstream operators and marketers,” says Justin Carlson, vice president and managing director of research at East Daley Capital Advisors. “The impact of the constraints in that region will result in low propane prices this summer, even for Northeast standards. One reason for this is Energy Transfer Partners’ Mariner East 1 Pipeline has been shut down for a month, removing vital C3 takeaway from the Northeast as spring quickly approaches.”

The analysis indicates if Mariner East 1 and Mariner East 2 are further delayed, midstream partners should expect lower earnings from lower realized liquids prices and stalled wet production growth. Wet producers unable to reach production guidance will drive earnings lower for midstream providers such as MPLX, Antero Midstream, Williams and CNX Midstream.

“NGL takeaway challenges from the Northeast are amplified with scarce liquids storage within the basin,” Carlson says. “The geology in Pennsylvania and West Virginia does not allow for significant amounts of large underground storage, leaving limited room for emergency storage if problems with takeaway arise. Couple this with the rapid growth in wet gas production, both current and expected, and some very real issues begin to present themselves.”