It is generally understood that the 2nd quarter sees natural gas pipeline maintenance at its highest annual levels. Pipeline maintenance is essential for a multitude of reasons, none more important than maintaining the long-term safety, viability, and durability of the natural gas grid itself. Maintenance is carried out in April, May and June as these months coincide with the lowest annual levels of natural gas demand, natural gas pricing, and pipeline variable transportation rates. By conducting most of the required maintenance during the low months of the year, pipeline companies minimize the necessary loss and opportunity costs associated with bringing pipelines and pipeline segments offline to carry out repairs. Whenever pipeline maintenance is carried out, production is expected to drop within the associated production basin. However, once maintenance stops and pipeline capacity becomes available, production normally picks back up to pre-maintenance levels. In basins where production is dominant relative to demand this can be seen particularly clearly. In recent years the Permian Basin has seen pipeline maintenance result in significant natural gas production disturbances, and near zero or below zero natural gas next day delivery pricing.
Permian
Maintenance on the KM Tejas pipeline resulted in a near 1 Bcf/d drop in production in early April, with KM Tejas pipeline capacity remaining under maintenance until further notice. Gulf Coast Express has also seen its pipeline capacity reduced due to maintenance beginning today and continuing through tomorrow, affecting 800 MMcf/d. From the 13th through the 14th, some pipeline capacity will be restored, with only 400 MMcf/d down for maintenance. KM Tejas and Gulf Coast Express continue to undergo maintenance, explaining West Texas’ lackluster production from the highs of early April.
Northeast
Tennessee Gas Pipeline undertook maintenance on their pipeline from April 4th until April 6th, with 500 MMcf/d to 1.0 Bcf/d of production lost in the Northeast during the period. Production in the Northeast has since recovered, however, Tennessee and Texas Eastern will be undergoing further maintenance from April 16th until April 23rd, which will likely result in Northeast production dropping between 500 MMcf/d to 1 Bcf/d once again.
Summary
As discussed, it can be argued that the 2nd quarter represents the time of the year which sees maintenance of natural gas pipelines at its highest; largely because pipelines have, relatively speaking, the least to lose by reducing capacity at a time chosen to coincide with reduced demand. As a result of maintenance carried out in dominant producing basins during the 2nd quarter, such as the Permian and Marcellus basins, production levels drop and remain depressed until the maintenance period ends. May and June will see further maintenance events, bringing the potential for more short-term, periodic disruptions to production throughout the remainder of the quarter.
