Major U.S. natural gas pipelines have more than 1.3 million Dth/d of firm gas transportation contracts slated to expire during the second quarter, according to an analysis of S&P Global Market Intelligence data.
WBI Energy Transmission poised for biggest roll-off
WBI Energy Transmission Inc. could see nearly 22% of its contracted capacity drop off when a contract with Montana-Dakota Utilities Co. ends June 30. A spokesperson for MDU Resources Group Inc., which owns the 3,800-mile WBI Energy pipeline system spanning the northern Plains and Rocky Mountain regions from Wyoming to Minnesota, declined to comment about whether the capacity had been recontracted. WBI Energy in February completed its 60-mile, 12-inch diameter North Bakken natural gas pipeline expansion in North Dakota.
Kinder Morgan Inc.’s Stagecoach Pipeline & Storage Co. LLC could see more than 6% of its contracted capacity roll off when a contract for 150,000 Dth/d of firm transportation ends June 30. A spokesperson for Kinder Morgan said the company does not comment on contract expirations. Kinder Morgan acquired the 185-mile Stagecoach system, which sends Marcellus Shale gas to Northeastern markets, in the second quarter of 2021.
Tallgrass Energy LP’s Rockies Express Pipeline LLC faced a pair of short-term contract expirations that totaled about 5.2% of the capacity of the 1,700-mile pipeline network that spans from Colorado to Ohio. The contracts with Freepoint Commodities LLC and BP Energy Co. each covered 150,000 Dth/d of firm transportation. A Tallgrass spokesperson said both contracts were seasonal.
Bullish outlook for midstream
The S&P Global Market Intelligence analysis, which used an index of customers and tariff data, covered U.S. interstate gas pipeline contracts with maximum daily transportation of over 100,000 Dth/d and their estimated reservation charges, if available.
Pipelines provide gas transportation service to shippers such as producers, utilities, industrial customers, power generators and energy marketers, often under firm contracts. Most of these agreements feature fixed reservation charges that are paid monthly regardless of the actual gas volumes moved or stored, plus a tariff component based on volume to compensate pipelines for their variable costs. S&P Global Market Intelligence estimates of monthly reservation revenue used the maximum revenue because negotiated rates are often not disclosed.
Market observers’ expectations for the midstream sector were largely bullish headed into the first-quarter 2022 earnings reporting season, with analysts watching for signs that the sector was pursuing infrastructure growth opportunities unlocked by high commodity prices and favorable sentiment for oil and gas because of the energy crisis in Europe.
Midstream executives in a series of earnings calls anticipated that growing demand for new U.S. LNG capacity would drive investment in other midstream expansions.
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