It Was Good Living With You, (W)aha - Understanding Permian Gas Takeaway Capacity at Waha Hub, Part 2

Permian natural gas production has climbed 1.75 Bcf/d, or nearly 40%, in the past three years to more than 6.3 Bcf/d in 2017 to date, and it’s poised to grow to nearly 12 Bcf/d over the next five years. Note that’s a “dry” or “residue” gas number; gross gas production is a couple of Bcf/d higher. As Permian production growth occurs, pipeline takeaway capacity from the primary trading hub in the area — the Waha Hub — will become increasingly constrained, a trend that will drive pricing and flow dynamics into the early 2020s. How full are the takeaway pipelines now and how quickly will constraints emerge? Today we continue our series on the Waha Hub with a look at current takeaway capacity and flows from the hub.

In Part 1 of this blog series, we noted that in our Top Ten Prognostications for 2017 blog at the beginning of the year, we said that big natural gas price differentials are coming to West Texas and South Texas because of major market changes happening at two increasingly significant natural gas market hubs: Waha in the Permian and Agua Dulce near Corpus Christi. Agua Dulce is becoming an important supply and pricing point for emerging liquefied natural gas (LNG) exports and exports to Mexico from South Texas, with the ability to attract gas supply from as far as the Marcellus/Utica shales in the Northeast. The Waha Hub in West Texas, in turn, is located at a crossroads of the fast-growing Permian producing region and markets in the Southwest, Midcontinent and Texas Gulf Coast regions, as well as across the border in Mexico.

The Gusher: US Crude Oil Supply and Demand Analysis

The GUSHER is a weekly crude oil PDF report that keeps subscribers abreast of market vitals such as production, demand, storage, imports/exports, and prices. The data and analysis presented are in an easily digestible format, and includes forecasts and commentary describing the driving factors behind evolving market dynamics. Our aim is to deliver the report each Wednesday afternoon.  

Our VIP Subscribers will receive access to GUSHER, along with all other subscriptions services, at no additional fee!

Click here for more information and to receive a free trial

 

Much of the associated gas produced in the Permian’s Midland, Central and Delaware basins flows through Waha, which means, that the hub is headed for takeaway capacity constraints, downward pressure on local prices and widening price spreads to downstream markets. Already, we’re starting to see signs of oversupply at the hub — as we said last time, spot gas prices at Waha so far this year have averaged 26 cents/MMBtu below national benchmark Henry Hub, compared with just 13 cents/MMBtu during the same period last year (source: NGI). We also discussed the Waha Hub’s location (in Pecos County, TX), its interconnections with more than a dozen pipelines (including four major interstate pipelines and nine Texas intrastate pipelines) with a combined takeaway capacity of more than 10 Bcf/d. The pipelines are configured into two primary hub-and-spoke systems: Energy Transfer Partners’ (ETP) Waha Header and the Enterprise Waha Hub, owned by Enterprise Products Partners. These two clusters of interconnects are then also connected by a pipe — an axle, so to speak. Additionally, many of the spokes, nearly all of which are bidirectional, are also connected to each other at different points (see Part 1 for details). Today we look at capacity utilization of the hub’s four primary takeaway corridors.

To access the remainder of It Was Good Living With You, (W)aha - Understanding Permian Gas Takeaway Capacity at Waha Hub, Part 2 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.