At first glance, the recent purchase of a natural gas pipeline network in southern Louisiana by EnLink Midstream from Chevron does not look very exciting. One of the assets - the Sabine pipeline – backbone of the Henry Hub CME NYMEX natural gas futures contract - reported losses of $7.5 Million and total flows averaging only 200 MMcf/d on Federal Energy Regulatory Commission (FERC) Form 2 in 2013. So what is the value of the pipelines tied to the world’s third largest futures contract? Turns out the Henry Hub futures contract generates some pretty good revenue for the pipeline operator without moving a molecule of gas. And there’s a bright future ahead for gas pipeline networks in Louisiana these days. We explain why in today’s blog.
At the end of September 2014, EnLink Midstream (formed in March 2014 by a merger between Crosstex Energy and Devon Midstream Holdings) paid Chevron $235 million for three natural gas pipeline systems in Southern Louisiana – the Sabine pipeline, the Bridgeline system and the Chandeleur system (see map in Figure #1). The assets include about 1,400 miles of pipeline from Beaumont, TX, to the Mississippi River corridor including about 11 Bcf of natural gas storage capacity at Sorrento and Napoleonville, LA. In addition to the pipeline and storage assets, the deal makes EnLink the owner and operator of 13 major interstate and intrastate connections to the Sabine pipeline that between them form the Henry Hub delivery mechanism for the CME NYMEX natural gas futures contract. So given that the NYMEX futures contract trades average volumes of roughly 3000 Bcf/d (that’s for all delivery contracts – it works out about 40 times the daily dry gas production of 75 Bcf/d) you would think that Henry Hub would be the busiest physical gas interchange in the world. But you would be wrong.
Figure #1
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About the song
“Here Comes the Rain Again” was written by Annie Lennox and Dave Stewart. It appears as the first song on side one of the Eurythmics’ third studio album, Touch. Released as a single in January 1984, it went to #4 on the Billboard Hot 100 Singles chart. Personnel on the record were: Annie Lennox (vocals, keyboards), Dave Stewart (guitar, keyboards), the British Philharmonic Orchestra, and Michael Kamen (string arranger and conductor).
Touch was recorded in 1983 at The Church studio in London and produced by Dave Stewart. Released in November 1983, it went to #7 on the Billboard 200 Albums chart and has been certified Platinum by the Recording Industry Association of America. Three singles were released from the LP.
Eurythmics was a British pop duo formed in London in 1980 by Annie Lennox and Dave Stewart. Both had previously been in the British punk band, The Catch, and the British pop band, The Tourists. They achieved international success with the Eurythmics’ single, “Sweet Dreams (Are Made of This),” which went to #1 on the Billboard Hot 100 Singles chart and was certified Gold by the RIAA in 1983. They released eight studio albums, a soundtrack album, a live album, two compilation albums, an EP, and 33 singles. They sold more than 75 million records worldwide. They have won a Brit Award, a Grammy Award, an MTV Video Music Award, and were inducted into the Songwriters Hall of Fame in 2020 and the Rock and Roll Hall of Fame in 2022. The group unofficially broke up in 1990 but has had a few reunions since then. Lennox has a successful solo career, and Dave Stewart is a highly regarded record producer. In March, Lennox played her first live performance in over six years at the Royal Albert Hall in London. Stewart will be embarking on a European summer tour with Eurythmics, featuring Vanessa Amorosi on vocals, beginning in July.
