A Thousand Miles From Henry - San Juan Natural Gas Basis Goes Premium

It’s not often these days that you read about gas markets in the San Juan Basin. In fact, the subject was probably never much of a hot topic because the San Juan has been something of an afterthought when it comes to Western gas markets, just a stop on the road between the Permian and markets along the West Coast and in the Rockies. However, those Western gas markets are setting up to be quite interesting this summer, as is the Waha gas market in the Permian, and understanding the mechanics of the San Juan is just one piece of the overall Western puzzle. In today’s blog, we take a look at the far-flung but increasingly interesting markets west of the Permian Basin.

It’s not hard to summarize our recent work on the San Juan Basin, because we’ve never really written about it. That surprised even us as we looked through our blog archive, though admittedly the San Juan is not the most talked-about region in the U.S. natural gas market. The Permian is, on the other hand, and we blog about it regularly. Most recently, we updated our readers on the current happenings in the Waha Hub basis market in Hold on Loosely, which covered how basis at the Permian’s premier gas hub is now trading at a premium in the forwards for some months. While the Waha premium is attributable in part to the impending start of the Whistler Pipeline, positive basis in the forward basis markets for the Houston Ship Channel also has something to do with it. So, what does all of this have to do with the San Juan way out in northwestern New Mexico, over 1,000 miles from Henry Hub? We will get to that in a minute, but first we need to hit the high points of how the San Juan Basin gas market interacts with the Permian.

Figure 1 below shows the major pipelines traversing the San Juan. It’s a relatively simple network compared to most basins, though it’s complicated somewhat by the fact that gas flows on some pipelines often shift, depending on supply/demand fundamentals and resulting gas prices. (The numbered circles in the map, which indicate points where flows are measured, should help in our discussion.) We will start by looking at the interstate pipelines that enter the San Juan from the east. The first of these is a leg of Kinder Morgan’s El Paso Natural Gas Pipeline (EPNG; dark blue line). Circle #1 marks the flow-measurement point near what EPNG refers to as its “Lincoln constraint.” At this point, gas can flow in either direction between the San Juan and the Permian. More on those flows later.

To access the remainder of A Thousand Miles From Henry - San Juan Natural Gas Basis Goes Premium you must be logged as a RBN Backstage Pass™ subscriber.

Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at info@rbnenergy.com or 888-613-8874.