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Over 4 Bcf/d of new outbound pipeline capacity from the Permian to the Gulf Coast comes online next year, throwing natural gas flows from West Texas into flux and deeply impacting the neighboring markets.
Expectations for Permian natural gas are far from what they were when this year started with production from the basin now expected to grow at a subdued pace over the next five years. Meanwhile, new pipeline projects out of the Permian have set their sights toward fulfilling LNG export demand along the gulf coast, and that gas must come from somewhere. With excess capacity and relatively little new production coming on in the Permian in that time frame, new pipelines will be pilfering gas from several of the legacy pipes out of the region, and that competition will directly impact Waha basis. These new shifts will have huge implications for gas flows in Texas and neighboring markets. As we take into account all of these factors, we believe the current forward curve does not accurately reflect the potential outcomes of this new market.
To address this evolving situation, RBN has prepared a Special Edition Multi-Client Market Study, titled Some Beach – 4 Bcf/d Permian Gas Capacity Headed to the Beach! – What Happens to Flows and Basis? The study details the fundamental analysis used to prepare our recently completed examination of Gulf Coast gas markets, and lays out our forecasts for production, pipeline flows and basis. We drill down into the factors described above, and explain why we believe that forward basis markets have not caught up to the combined impact of a lower outlook for Permian production plus another 4 Bcf/d of pipeline capacity coming to the Gulf Coast.
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