Recent years have seen fundamental changes in the supply and competitive landscape of the North American natural gas market. In response to high natural gas prices that prevailed during most of the last decade, gas producers in the lower 48 now have developed new sources of supply and technology, particularly to access new shale gas formations. These new supplies have encouraged a substantial expansion of the natural gas pipeline network in North America to allow the producers to reach end-use markets.
These events also have helped gas customers through greater supply diversity, lower commodity costs and expanded service options. However, if customers want to continue to enjoy the relatively low costs of capital that the regulatory compact provides in the long run, affected pipelines will need help from regulators.
That’s because these new gas supplies also have changed flow patterns in the North American pipeline grid. The result has been a considerable increase in competition and risk, which can have serious consequences for pipelines and their required rates of return. This new landscape poses challenges for regulators and management alike.