expansion projects

Florida’s electric utilities are turning to natural gas-fired power and renewables for all their incremental generation needs and as replacements for the older coal units they’ve been retiring. The state’s big bet on natural gas has been spurring the development of new pipelines. And, because of big shifts in where gas is being produced and where it’s flowing, the Sunshine State will soon be receiving an increasing share of its gas needs from the Marcellus region. Today, we discuss the slew of new gas-fired power plants that have come online, the additional plants planned, and gas flows on Sabal Trail, the first new gas mainline into the state in almost two decades.

Florida’s increasing demand for natural gas for power generation isn’t new, but like a young alligator in the Everglades, its appetite is voracious and growing. More and more gas-fired power plants have been coming online, increasing gas demand and spurring the development of new gas pipeline capacity into the state. And, because of big shifts in where gas is being produced and where it’s flowing, the Sunshine State will soon be receiving an increasing share of its gas needs from the Marcellus region. Today, we begin a two-part look at how rising generation-sector demand for gas and a new pipeline are changing gas-flow dynamics in the U.S. Southeast.

A big push is on to mitigate and ultimately fix the Permian’s natural gas takeaway constraints, which in recent months have widened the price spread between gas at Waha and at Henry Hub to levels not seen in years. Despite the efforts to quickly add incremental capacity to existing pipelines and build greenfield pipes, however, the momentum behind Permian crude production growth — and, with it, the production of more associated gas — make a months-long blowout in the Waha basis in 2019 a good bet.  Questions about the degree and duration of that basis pain and the amount of new pipeline capacity that will be needed (and how soon) can only be answered by taking a detailed look at what’s been happening and what’s being planned. Today, we discuss highlights from our new 24-page report on Permian gas takeaway constraints and their effects.

Gas producers in the Permian are facing the prospect of severe transportation constraints over the next year or so before additional gas takeaway capacity comes online. Left unchecked, continued production growth could send gas at Waha spiraling to devastatingly low prices for producers. However, there are a number of ways producers and other industry stakeholders could mitigate the growing supply congestion in West Texas, at least in part, and possibly dodge the proverbial bullet. The longer-term solution will come in the form of new pipeline capacity, which will shift vast amounts of Permian gas east to the Gulf Coast and potentially create a new problem — supply congestion and price weakness along the Gulf Coast, at least until sufficient export capacity is built there to absorb the excess gas. Today, we wrap up our Permian gas blog series, with our analysis of how these events will unfold, including an outlook for Waha basis.

Natural gas supply growth from the Permian Basin has flooded the Texas market in recent months, filling up takeaway pipelines and sending Waha spot prices to steep discounts relative to its downstream markets. Incremental demand — from exports to Mexico for gas-fired power generation as well as for power demand in Texas — has provided some relief for West Texas prices in recent weeks. But Texas power demand is seasonal and, while Waha’s exports to Mexico are expected to continue growing, it’s likely to be on a piecemeal basis. Thus, longer term, new Permian takeaway capacity will be needed to balance the Waha market. To that end, there are a bevy of takeaway projects vying to expand capacity from the Permian. These projects — their timing and routes — will drive the Texas gas flows and pricing relationships over the next several years. Today, we continue our series on Permian gas, this time delving into the various takeaway capacity projects competing to move Permian supply to market.

Production of crude oil and associated gas in the Permian continues to rise, despite pipeline takeaway constraints that have widened crude spreads and depressed natural gas prices at the Waha Hub. But while oil can be — and is being — transported by trucks and railroads when crude pipelines are full, natural gas needs to be either piped away or flared, and Permian gas production is now approaching the effective maximum takeaway capacity out of the basin. While a slew of new projects have been announced to relieve the Permian gas takeaway problem, the new capacity won’t arrive soon enough to keep Permian production from hitting the takeaway-capacity wall sometime in 2019.  Today, we begin a series examining Permian production trends and their implications for pipeline flows and pricing in Texas.

For the first time in more than a decade, Florida — the second-largest natural gas demand market for electric generation in the U.S. (after Texas) — now has a new gas supply route into the state. Last month, Enbridge’s Sabal Trail Transmission pipeline began partial service, increasing Florida’s inbound gas transportation capacity by 1.1 Bcf/d (26%) — just in time to help meet air conditioning demand during the hottest months of the summer. The pipeline ultimately will for the first time connect Marcellus/Utica shale gas to the Sunshine State’s voracious power market. In the month or so since it began service, the pipe has already ramped up to 0.4 Bcf/d and, in conjunction with additional upstream expansions, could ultimately change not only how Florida gets its gas but where that gas gets sourced. Today, we provide an update on Sabal Trail and its effect thus far on gas flows.

The Florida natural gas market will soon have access to another supply source. In June 2017, the Sabal Trail Transmission natural gas pipeline project is expected to begin service, bringing the market one step closer to connecting Marcellus/Utica natural gas to demand markets on the increasingly gas-thirsty Florida peninsula. The project will increase gas supply options for growing power generation demand in the Sunshine State while effectively also increasing gas-on-gas competition between producers in the Northeast, Gulf Coast and Midcontinent. Today we provide an update on Sabal Trail and its related projects.

New power plants in Mexico have spurred natural gas demand south of the border––and fast-rising gas imports from the U.S, particularly Texas. Thus far, pipeline exports from Texas to Mexico have primarily been supplied by gas produced within the Lone Star State, but a big squeeze is on as nearby Texas production volumes decline (particularly the Eagle Ford) and export demand continues to increase, not just from Mexico but from new liquefaction/LNG export terminals along Texas’s Gulf Coast. Today, we unpack the shifting Texas supply and demand balance and potential implications for the market.