Jigsaw Puzzle - How a New Natural Gas Storage Project Fits In The Permian

Permian natural gas markets have never been more interesting, if you ask us. Sure, there are no negative prices at the Waha hub these days, and the triple-digit prices produced by Winter Storm Uri are starting to fade in the rear view. But there’s plenty of action ahead for Permian gas this year and next. For starters, sometime in the next few weeks the 2.0-Bcf/d Whistler Pipeline is scheduled to begin moving natural gas from the Permian to South Texas, further enhancing takeaway options for the basin’s continually growing supply of gas. That’s good news, considering Permian gas production is at record highs and set to grow to over 14 Bcf/d by the end of 2022. Speaking of records, gas exports from the Waha Hub to Mexico have never been higher and should increase further this summer, as power demand increases and a new pipeline across the border is expected to come online. Topping all that off is the recent news that the Permian will soon see a major gas storage facility start up right in the middle of the Waha hub. The latter is the focus of today’s blog, in which we detail the latest addition to the Permian gas infrastructure puzzle.

It’s been an eventful last year for the Permian, to say the least. About 12 months ago, producers in the basin were sitting on the edge of their seats, holding their breath, and shutting in a significant portion of Permian production while crude oil prices languished after going negative in April 2020. As if that weren’t wild enough, the Permian then had to slash its way through the trouble created by Winter Storm Uri back in February, when frigid temperatures and widespread power outages knocked off far more production than was curtailed during the spring of 2020. We won’t rehash all those details here today, as we just covered them in Crazy – A Year Like No Other, but it’s safe to say that the Permian should be a more stable place to operate in the weeks ahead (knock on wood). However, that doesn’t mean it will be boring — far from it! In fact, in the midst of Uri’s insanity, the latest gas infrastructure development in the Permian was announced, when Enstor agreed to sell its Waha Gas Storage assets to a newly formed joint venture entity, Waha Storage LLC.  The new company is jointly owned by Whistler Pipeline LLC (“Whistler”) and Delaware Basin Residue, LLC (“Agua Blanca”). Agua Blanca is a joint venture between MPLX LP (NYSE: MPLX) and WhiteWater Midstream.  Whistler is a joint venture between MPLX LP (NYSE: MPLX), WhiteWater Midstream, and a joint venture between affiliates of West Texas Gas, Inc. and Stonepeak Infrastructure Partners. Though it might have been lost in the news of $200/MMBtu prices at Waha back in February, we sense that this latest announcement has been met with an elevated level of interest by Permian gas marketers. Let’s take a look at the project’s details.

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