El Paso Natural Gas

Midstreamers developing natural gas takeaway capacity out of the Permian have understandably focused on pipelines to the Gulf Coast — and along the coast to LNG export terminals and other big gas consumers. But don’t forget the Desert Southwest, where demand for gas-fired power is soaring. Energy Transfer recently committed to building a 516-mile, 1.5-Bcf/d expansion to its Transwestern Pipeline system from West Texas to the Phoenix area, and hinted that it might double the project’s capacity due to the high level of interest. In today’s RBN blog, we discuss Energy Transfer’s aptly named Desert Southwest Project, what drove its quick progress to a final investment decision (FID), and what other westbound projects out of the Permian might still happen. 

The U.S. West Coast natural gas market is at the forefront of the energy transition, but regional natural gas prices are instead signaling the need for construction of newbuild gas pipeline capacity to the region. Without it, markets west of the Permian Basin have been hard-pressed to take advantage of the supply growth in West Texas and have struggled to consistently maintain adequate natural gas supplies for some time now. To make matters worse, last month, a segment of El Paso Natural Gas Pipeline (EPNG), a primary artery for moving Permian gas west, experienced a rupture, further tightening supplies. Today, we highlight the major market impacts and longer-term implications of the pipeline blast and subsequent flow restrictions.

For some time now, natural gas producers in the Permian and the Eagle Ford have been counting on rising pipeline exports to Mexico to help absorb a lot of the incremental production in their plays. Their hopes have been bolstered in the past couple of years by the build-out of a number of new pipelines from the Waha and Agua Dulce gas hubs to the U.S.-Mexico border. Gas pipeline development south of the border hasn’t kept pace, though, mostly due to regulatory and construction delays. Also, a recent dispute over tariffs on a newly completed large-diameter pipeline, extending from the southern tip of Texas to key points along Mexico’s Gulf Coast, had left the pipe sitting empty this summer. That tiff has since been resolved and gas is flowing on the new pipeline, allowing those piped southbound exports to hit a daily record high near 5.9 Bcf/d earlier this month and average above 5.5 Bcf/d this month to date. Plus, progress is being made on other planned Mexican pipes too. This all leads us to ask, is the long-promised surge in U.S. gas exports to Mexico just around the corner? Today, we look at the latest developments regarding Mexico’s natural gas pipeline infrastructure additions.

Permian natural gas prices have been on a wild ride lately, trading more than $5/MMBtu below zero in early April before recovering to just above zero over the last few weeks. It’s hardly a secret that the Permian’s gas market woes have been the direct result of production exceeding pipeline capacity. That situation is set to change in a few months, when Kinder Morgan starts up its 1.98-Bcf/d Gulf Coast Express Pipeline, providing much needed new takeaway capacity. And that’s not all GCX will do. Its start-up will shift huge volumes of gas toward the Texas Gulf Coast that currently flow out of the Permian to other markets, likely causing a ripple effect across more than just the West Texas gas market. Today, we look at how Kinder Morgan’s new gas pipeline will redirect significant volumes of Permian gas currently flowing north to the Midcontinent.

Permian natural gas prices are having a rough spring. After a volatile winter that saw two periods of negative-priced trades followed by a period of relatively strong prices, values at the Permian’s major trading hubs hit the skids earlier this week just as Spring Break set in for most in the Lone Star state. Once again, pipeline maintenance and burgeoning production appear to be the main culprits, but this upheaval feels different, in our view. Clearly, the price crash has reached a new level of drama, with day-ahead spot prices at West Texas’s Waha hub now settling below zero — some days by more than $0.50/MMBtu. Gas production has raced higher too, now within striking distance of 10 Bcf/d, on the coattails of continued oil pipeline capacity expansions, but new gas pipeline takeaway capacity is an estimated six months away. What becomes of Permian gas prices in the meantime, and how much worse could already-negative prices get? Today, we discuss the drivers behind the latest price deterioration and assess what’s ahead for the Permian natural gas markets.

The Mexican market is critically important to Permian producers. Rising gas demand south of the border — along with expected gains in LNG exports from new liquefaction/export facilities along the Gulf Coast — are key to their plans to significantly increase production of crude oil, which brings with it large volumes of associated gas. All that gas needs a market, and nearby Mexico is a natural. For a number of years now, Mexico’s Comisión Federal de Electricidad has been working to implement a plan to add dozens of new gas-fired power plants and to support the development of new gas pipelines to transport gas to them from the U.S. The new pipelines have been coming online at a slower-than-planned pace. But what pipeline capacity has been added across the border from West Texas is already changing Mexico’s gas market. The El Encino Hub in Northwest Mexico is one such area where there are signs of a shifting supply-demand balance. Today, we continue a blog series on key gas pipeline developments down Mexico way and the implications for gas flows, this time delving into the dynamics at the El Encino Hub.

While Permian natural gas pipeline announcements came fast and furious last year, it had been relatively quiet on that front the past few weeks. Leave it to the folks at WhiteWater Midstream to break the lull, which is exactly what they did with the recent announcement of a binding open season for a new interstate pipeline in the heart of the Delaware Basin. Named Steady Eddy, the pipeline would originate in an underserved corner of the Permian and provide access to the Waha Hub, where a number of planned greenfield pipelines leaving the Permian will begin. Today, we look at the details of WhiteWater’s proposed Steady Eddy pipeline project.

Mexico’s energy sector has been dealing with a fair amount of uncertainty of late. Newly installed Mexican President Andrés Manuel López Obrador has promised to undo elements of the country’s historic energy reform program, limit imports of hydrocarbons, and focus on domestic production and refining. How much will all this affect the export of natural gas from the U.S. to Mexico? It’s too soon to know what the long-term impact might be, but for now, gas exports remain near record highs and the pipeline buildout within Mexico is proceeding. That’s not to say, however, that the infrastructure work has gone without its own set of challenges — many of those were apparent well before the recent political changes. Today, we begin a series examining the opportunities and potential pitfalls ahead this year for Mexico’s natural gas pipeline infrastructure additions.

Constructing greenfield pipelines is never easy — just ask any midstream developer you know — but building them across the breadth of Texas comes with its own unique challenges. There’s distance, for starters, and today’s massive associated gas growth in the Permian Basin is occurring more than 400 miles from the closest demand along the Gulf Coast. That makes the pipelines relatively expensive at somewhere near $2 billion a copy. Integrating Permian supply with Gulf Coast demand also requires a big network of pipelines along the coast, as the demand is spread out from Louisiana to Mexico. Few midstream companies have such a network. Kinder Morgan does, one reason why, in our view, the Gulf Coast Express project was the first — and to-date the only — greenfield project from the Permian to proceed with a final investment decision. In the race to be the next Permian natural gas relief valve pipeline, the same hurdles will have to be overcome. On Friday, news came that a group of four companies is planning the Whistler Pipeline, and a closer look at the project reveals it may be capable of meeting the challenges needed to make it a serious player in the Permian pipeline race. Today, we look at the details of the latest Permian natural gas pipeline project.

There was a time when natural gas prices in the Permian Basin spent most of the summer bouncing within a few cents of the benchmark Henry Hub, as ample pipeline takeaway capacity and seasonally strong demand combined to keep a lid on price blowouts. Times have certainly changed, with ballooning local production overwhelming existing takeaway capacity and widening the price spread between Permian gas markets and Henry Hub. However, the erosion in Permian gas basis has been anything but orderly. The current market is defined by significant swings in gas basis, depending on factors such as pipeline maintenance and weather. So, while the trend in Permian gas basis is decidedly lower, the path to get there is looking like a gut-wrenching roller coaster ride. Today, we look at recent swings in Permian natural gas basis pricing.