Houston (Platts)--29Nov2012/403 pm EST/2103 GMT

A slowdown in the construction of pipelines will lead to lower natural gas production growth in some parts of the Marcellus Shale and could lead to higher gas prices next year as supply from higher-priced regions makes up some of the shortfall, investment bank FBR Capital Markets said in a Thursday report.

The growth in Marcellus production will slow to 1.3 Bcf/d over the next 12 months from a rate of 2.3 Bcf/d during the past 12 months as many of the projects aimed at boosting take-away capacity in the region are not expected to enter service until the fourth quarter of 2013, FBR said.

Production from the Northeast Marcellus rise by estimated 60% to nearly 4.9 Bcf/d during the fourth quarter 2012 from 3.1 Bcf/d in the fourth quarter 2011, according to FBR. With 3.9 Bcf/d of pipeline capacity additions planned for the Northeast market through 2016, the bank said it expects future growth to mirror planned pipeline take-away capacity expansion.

"We estimate that about 0.5 Bcf/d of capacity will be added early next year as the Williams gathering system comes on line," FBR said in the report.

Williams is laying a gathering system from the Wyoming/Susquehanna County area in Pennsylvania to Iroquois zone 2, effectively boosting take-away capacity by about 500,000 Mcf/d in the first half of 2013.

"The next big increase in capacity is not expected until late Q4 2013 as four different projects come on line to add 1.4 Bcf/d in Q4 2013," the report said. "As such, after the nearly 60% increase since Q4 2011, we expect [Northeast] Marcellus area production to grow only an additional 18% through Q4 2013, with a cumulative growth of 43% to 7 Bcf/d through Q4 2014."

The supply deficit could boost gas prices to an average US gas prices to $4.50/MMBtu for 2013 and beyond as other higher-cost supply like the Haynesville step in to respond to lower supply, FBR said.

Meanwhile, in the Southwest Marcellus, production is estimated to grow 40% to 2.2 Bcf/d during the fourth quarter 2012 from 1.6 Bcf/d during the same quarter last year, FBR said. The bank expects production will grow an additional 28% to 2.8 Bcf/d by the fourth quarter 2013.

The production growth comes as some 2.4 Bcf/d of pipeline takeaway capacity additions are planned for the Southwest market through 2016, the report said. In addition, 4 Bcf/d of processing capacity is expected to be added in the next two to three years, it said.

Looking ahead, FBR said it expects some 12,681 MW of new generation will be added in the region by 2016, adding some 1.3 Bcf/d to gas demand.

Futher, FBR said Marcellus production -- which it estimates could reach 18 Bcf/d by 2020 -- could push the Northeast to become a net exporter of supplies as early as the shoulder months of next year.

"With current average Northeast demand of 12 Bcf/d, and a range of 9 Bcf/d in the shoulder months and 17 Bcf/d in the winter months, we expect the Northeast to be a net exporter of gas into storage and other demand centers starting the shoulder months of next year and attain full-year supply/demand balance by 2015," FBR said, noting the net exportability and self-sufficiency will have significant implications for realized prices for Marcellus production, as well as realized prices throughout the US.

--Leticia Vasquez, leticia_vasquez@platts.com

--Edited by Jeff Barber, jeff_barber@platts.com

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