When it comes to Texas natural gas markets, the Permian has been getting much of the attention lately, with its rapid supply growth, limited pipeline takeaway capacity and sometimes negative prices. However, a wave of gas infrastructure development just starting to come online along the Texas Gulf Coast is set to steal some of the Permian’s spotlight over the next few months. Two large liquefaction/LNG export facilities are ramping up on the coast, as are the pipeline reversal projects designed to supply them. Also, three announced Permian-to-Gulf-Coast gas pipelines slated for completion over the next 24 months will move supply cross-state to destinations spanning the area from the Houston Ship Channel to the Agua Dulce Hub near Corpus Christi. That’s a lot of change ahead for these key Texas gas markets. Today, we turn our attention downstream of the Permian to the Houston Ship Channel market, including upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply and demand balance.
Let’s be fair, the real excitement in Texas natural gas has been mostly focused on the Permian lately and we’ve blogged on it extensively. (See our Sitting, Waiting, Wishing blog from a few days ago, for the latest on the potential impacts of the possible early start-up of Kinder Morgan’s Gulf Coast Express (GCX) pipeline.) For all that’s going on in the Permian, we can’t take our eyes off the region. But there are also important shifts occurring across the state along the coastline — what will soon be an even more important destination for Permian gas. Today, we focus on one of those developments: changes in the Houston Ship Channel (HSC) market. HSC pricing has trended decidedly weaker over the past few months, especially when compared to this time last year. Figure 1 plots the HSC basis price, which is the difference between HSC and Henry Hub. When HSC basis is positive, gas there is priced over Henry; negative basis means HSC gas is selling at a discount. Note that our prices come from the good folks at Natural Gas Intelligence (NGI).