Florida Gas Zone 3 Premium Soars as Pipeline Capacity Constraints Bite

The natural gas pipeline capacity in Florida's Zone 3 is facing severe constraints, driving up premiums. According to NGI's Entropic Analytics data, flows at the #8 Zachary compressor station (CS) in Zone 2 have been running at near full operating capacity every day in September, while the #11 Mt. Vernon CS has run at 77.9%.

The bottleneck is not new, as FGT's CS #8 Zachary has been flowing at or near its posted operating capacity on 98 of 109 gas days since June 1. Interconnecting pipelines have also posted restrictions from their side, with Columbia Gulf Transmission listing its Florida Gas interconnect under point constraints and Transco showing zero available no-notice swing capacity.

The two storage fields east of the gateway are moving gas in opposite directions, further exacerbating the issue. Southern Pines Storage is drawing down, sending a net 285 MMcf/d onto FGT in August and 116 MMcf/d in September, while Bay Gas Storage has been a net injector, taking 386 MMcf/d from Transco in September.

As a result, Florida Gas Zone 3's premium over its own upstream supply zone has widened sharply since early August. The spot price settled at $6.075/MMBtu on Wednesday, up from $5.810 Tuesday, and has averaged $5.884 so far in September, up from $4.130 in August and $3.870 across June and July.