This figure shows Solomon’s forecast for the annual gas price basis differentials in nominal United States dollars per million British thermal units (USD/MM Btu) for the pricing points examined. Solomon expects that growth of Appalachia production going forward will be more measured. This will continue to moderate Appalachia basis towards a balanced market. Infrastructure enhancements in Appalachia are currently under construction. AECO basis is expected to remain flat as new economic capacity on the TransCanada Mainline becomes available, providing relief to an oversupplied Western Canada market. Post-2020, AECO basis narrows as TransCanada Mainline reconfigures long-haul tolling and LNG export projects provide an outlet for Western Canada production.
As market natural gas price basis differentials narrow, the value of long-haul transportation routes will decline. Solomon expects the trend of increased gas well initial productivity rates will maintain lower gas price volatility and flatten gas price basis differentials across North America. LNG exports will introduce increased volatility as exports continue to grow. Normal weather in 2017–2018 will provide strength for pricing in New York and New England. Chicago is expected to be an oversupplied dumping ground for producing region gas supplies and will be priced below Henry Hub for the forecast period.