Whether it's the belated arrival of winter, start-up of the first major transcontinental segment of the Rockies Express (Rex) pipeline, the accelerating decline in Canadian production or a combination of the three, the basis differentials between Rocky Mountain region natural gas production and other markets are shrinking by the week. California gas consumers have long enjoyed heavy discounts because producers — especially in the western Rockies and San Juan Basin — had little alternative but to sell cheaply, given sparse local demand and the absence of pipelines headed east. Those discounts are quickly eroding. This could both encourage Western US gas production and make the West Coast relatively more attractive to LNG sellers.
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