Born on the Bayou - LNG and Pipeline Reversals Turn Louisiana Gas Market Upside Down, Part 4

The Louisiana natural gas market is in a state of major flux. The state’s supply mix has changed drastically, with Offshore Gulf of Mexico production declining over the past few years and the long-dormant Haynesville Shale making somewhat of a comeback in the past year. At the same time, four new liquefaction trains at Cheniere Energy’s Sabine Pass LNG terminal have added more than 3.0 Bcf/d of export demand that didn’t exist before 2016. These trends signal a shift in Louisiana’s supply-demand balance and are a prelude to big changes yet to come as producers and midstreamers look to provide solutions for balancing the market. Today, we continue our deep-dive into recent and upcoming changes in the Louisiana market, this time focusing on flow trends across the state’s North, Offshore Gulf and Central pipeline corridors.

In Part 1, we looked at the growing importance of the Louisiana market in balancing the U.S. gas market. It’s at the epicenter of natural gas demand growth in the U.S. For that reason, it’s also the destination market that U.S. gas producers and midstreamers are targeting. Over the next couple of years, these trends will transform flows and pricing relationships in and around Louisiana.

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To understand how this will transpire and what it will mean for the gas market, we analyzed historical gas flows moving in and out of Louisiana historically along seven corridors — Upper and Lower East, Upper and Lower West, North, Offshore Gulf and Central — each of which provides insights on how flows through Louisiana are responding to changes in supply and demand. Specifically, we identified meter locations or segments that reflect cross-state flows and measured the net receipts and deliveries for each pipe using daily pipeline flow data from our friends at Genscape. If the net volume moving across the state line is negative, that signifies net outflows of gas from Louisiana, while positive volumes reflect net inflows into the state. (For more details about pipeline flow data see Sooner or Later.)

We learned from our analysis in Part 2 that gas supply along the Upper East corridor is increasingly moving east from the Perryville Hub (in northeastern Louisiana) over the past year or so, and the aggregated capacity of the seven pipes in that corridor is nearly full. Flows on the Lower East corridor, on the other hand, have remained relatively steady, with the exception of two pipelines — Williams’s Transco and Enbridge’s Texas Eastern Transmission (TETCO) — as expansion projects were completed to flow gas south from the Marcellus/Utica. These two have seen their eastbound flows diminish, and in the case of TETCO, reverse entirely to flow into Louisiana.

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