In the recent history of the shale revolution, the Appalachian basin has been associated with huge amounts of natural gas production, and along with that, the need for interstate pipelines to get the gas to major demand regions (these regions primarily being the Northeast urban corridor, the southeast, and most importantly, the gulf coast). This pipeline buildout is the driver for the price difference between gas in the Appalachian region, and gas priced at the Henry Hub (in the trading world, we call this difference “basis”). Over the past year, this buildout has occurred, creating an excess amount of pipeline capacity between Appalachia and the gulf coast (Henry Hub), therefore the price difference has narrowed. With this, there has been an increased amount of supply reaching the gulf coast, to keep Henry Hub prices at the same historical level, increased demand must also occur. The largest part of this demand increase will be from LNG exports. Currently, and throughout 2019, new LNG facilities are coming on line to export more gas. The big question is, will the export demand for LNG be enough to match the supply increase of natural gas?
As a mineral rights owner, these macroeconomic factors can seem far removed from the hills of Appalachia, but they have major impacts on the investment decisions of the producers, and thus the drilling and leasing activity that happens in your back yard. As this infrastructure is built, it creates volatility in the price of natural gas, as new demand and supply factors shift. At ARC, we want to give mineral rights and oil and gas royalty owners the ability to remove this volatility, lock in value, and have a clearer picture of their economic future, all without having to sell your mineral rights/oil and gas royalties.
Learn more about mineral rights ownership with Advance Royalty Company.