A regulatory topic that had long been very backburner — the so-called “311” transportation of natural gas — is suddenly front and center because it applies to the slew of new, mostly intrastate pipelines that have been built across Texas to get Permian gas to LNG terminals on the Texas and Louisiana coasts.
Natural gas production in the Permian has increased by about 1 Bcf/d since last November to about 8 Bcf/d today. That incremental gas production has used up virtually all of the remaining interstate and intrastate pipeline capacity out of the region, including the all-important pipes that move gas to the Houston area and East Texas. There’s considerable takeaway capacity still available on pipes from the Waha Hub to the Mexican border, but they can’t fill up until connecting pipelines and new gas-fired power plants are completed within Mexico. Permian supply is coming on faster than takeaway pipelines and demand can’t handle it. Something’s got to give. But what? Today, we continue a series on Permian gas with a look at the effects of Permian and Gulf Coast gas supply growth on Texas gas flows and pricing.
The natural gas pipeline grid in Texas is undergoing a historic transformation as interstate pipelines designed to move gas north and east from the Gulf Coast region are being reversed, enabling Marcellus/Utica gas to flow to LNG export markets in Louisiana and Texas, and via Texas for pipeline export to Mexico. With a history of oil and gas production going back more than 100 years, no region in the world has a more convoluted network of pipelines than Texas. The state can be viewed as a dense “spaghetti bowl” of interconnected interstate and intrastate systems that defies traditional gas market analysis, in part because intrastate pipelines do not post receipts and deliveries on their systems as required by federally regulated interstate pipelines. However, it is possible to assess the dynamics of regional flows and capacities by examining the morass of flow data available from interstate pipelines in the region that connect to the intrastates. To help make sense of this data, RBN has developed a simplified model that facilitates an understanding of Texas natural gas flows and capacities that we call (unsurprisingly since it’s RBN) the Fretboard Model because the region’s interstate pipelines and capacity constraints look (with just a bit of artistic license) very much like a guitar fretboard. In today’s blog, we introduce this model.
Providing the capacity to transport Marcellus/Utica natural gas to and through the state of Texas to LNG export terminals and to Mexico will require pipeline reversals, new pipe and other enhancements along a combination of interstate and intrastate lines. In many ways, the long-distance part of the job––the reversal of large-diameter pipelines between the Northeast and the Lower Mississippi Valley––is the more straightforward; the greater challenge will be reworking the complicated pipeline networks between the Texas/Louisiana state line and the U.S./Mexico border. Today we review Texas pipeline projects being planned to allow increasing southbound flows of Northeast gas.
Planned liquefaction/LNG export facilities along the South Texas coast and growing demand from Mexico’s electric power sector together will require several billion cubic feet/day of additional U.S. natural gas over the next three to five years. Gas producers from the Marcellus/Utica to the Permian are targeting these markets, but there are questions regarding whether the Lone Star State’s existing pipeline infrastructure is sufficient to deliver all that gas to these critically important export markets. Part of the solution will be optimizing the use of Texas’s impressive—but sometimes misunderstood intrastate pipeline networks, particularly the far-reaching systems operated by Enterprise, Energy Transfer and Kinder Morgan. Today, we discuss one part of the solution, an inexpensive but impactful Kinder Morgan project that will enable about 1 Bcf of natural gas from various sources to reach South Texas LNG exporters and Mexico on KM’s intrastate system.
