Within the next year, the Permian Highway and Whistler natural gas pipelines will add 4.0 Bcf/d of incremental capacity from the Permian Basin to the Gulf Coast, with gas supplies on those pipes primarily targeting LNG exports. But in the years since these pipeline projects were initially envisioned, market conditions have been radically transformed by consequences of the COVID era, on both the supply and demand sides of the equation. The outlook for supply growth is lower, while the dependability of LNG exports has been thrown into question following massive cargo cancellations this summer. In RBN’s special-edition multi-client market study, titled Some Beach, we break down the consequences of these developments into eight distinct steps that demonstrate how Texas gas markets are likely to evolve as flows and basis respond. Today’s blog summarizes those conclusions.
The Permian is set to send increasing volumes of natural gas to the Texas Gulf Coast next year, but it is unlikely to be the flood that was once expected. This year’s decline in oil prices has slashed budgets for West Texas producers and rig counts show no sign of a big rebound anytime soon. As a result, growth of oil and associated gas from the Permian will be tepid at best over the next few years, which is a major change from when oil prices hovered north of $50/bbl. Despite the moderation in gas volumes out of the basin, infrastructure changes in 2021 are likely to roil Permian gas markets and have important knock-on impacts for adjacent regions and end-users that depend on West Texas supply. With much less incremental gas from the Permian, there are likely to be significant shifts in gas flows, particularly across the Texas-Louisiana border, to help meet the big increases anticipated for LNG exports. Today, we continue a series that highlights findings from RBN’s new, Special Edition Multi-Client Market Study.
Permian natural gas production is now expected to grow at a subdued pace over the next five years, as lower oil prices and a focus on capital discipline have slashed rig counts. Few observers see the Permian situation changing anytime soon, especially as crude oil prices continue to hover around $40/bbl. That said, the Permian gas market will be anything but dull over the months and years ahead. More than 4 Bcf/d of new outbound pipeline capacity from the Permian to the Gulf Coast will be coming online next year, throwing natural gas flows from West Texas into flux and deeply impacting neighboring markets. While natural gas basis at the Permian’s primary Waha hub should improve dramatically, outflow to the Midcontinent will likely fall sharply and potentially reverse, and the Texas Gulf Coast will see an influx of supply on the new pipelines. Today, we continue a series that highlights findings from RBN’s new, Special Edition Multi-Client Market Study.
Given that Permian natural gas prices are once again hovering under $0.50/MMBtu, Texas’s other gas markets get little attention these days. That doesn’t mean that major shifts in the Lone Star State’s natural gas supply and demand markets aren’t occurring outside of West Texas, however. In fact, it’s quite the contrary, particularly when it comes to the Houston Ship Channel gas market. There, major changes — new gas pipelines, pipeline reversals and new LNG trains — continue to influence flows and prices. Today, we provide an update on the latest in gas infrastructure changes along the Texas coast and their potential impacts on the region’s supply and demand balance.
When it comes to Texas natural gas markets, the Permian tends to steal the show. With its roughly 2 Bcf/d of annual production growth, constrained pipelines and absurdly cheap — sometimes even negative — pricing, it’s hard for the other gas hubs in the Lone Star State to garner much attention. However, the myopic focus on West Texas overlooks a noteworthy gas market shake-up taking place on the Texas Gulf Coast, where most of the Permian’s incremental gas production is headed and where multiple new liquefied natural gas facilities are coming online to move the new supplies into world markets. Also, new export pipelines are moving increasing volumes south of the border to Mexico. Today, we provide an update on the latest in Texas Gulf Coast gas infrastructure changes and their potential impacts on the region’s supply and demand balance.
If it’s not one thing, it’s another in the Permian natural gas market. Just as it appeared that prices in the West Texas basin were finally turning a corner and strengthening with the full start-up of Kinder Morgan’s Gulf Coast Express Pipeline (GCX) late last month, various issues have again conspired to send daily Permian cash prices back down to near zero yet again. And it’s not just the daily spot markets that have come under pressure; forward prices were also severely discounted a few days ago when Kinder Morgan announced that the in-service date of its next long-haul pipeline from the region — the Permian Highway Pipeline project — would be delayed from late 2020 to early 2021. Keeping track of the roller-coaster ride of Permian gas prices and the drivers behind the highs and lows continues to keep heads spinning. Today, we explain the latest wild moves in the Permian natural gas market.
After months of severe natural gas pipeline constraints, Permian producers and shippers are reveling in the relief of new takeaway capacity. Kinder Morgan’s Gulf Coast Express (GCX) Pipeline, which began flowing initial volumes in mid-August, last week began full commercial service on its 2-Bcf/d greenfield route from the Permian to South Texas. Actual volumes on GCX are hard to come by, but all indications are that flows are ramping to near capacity. That surge in Permian outflows in recent weeks has propelled natural gas prices at the regional benchmark Waha Hub — which traded as low as $5.00/MMBtu below zero earlier this year and fell into negative territory as recently as August 8 — to nearly $2/MMBtu, levels not seen at the hub since last winter. However, with the sting from negative prices only now just fading, many in the market are wondering if this rally is here to stay or just a temporary reprieve. Today, we look at the latest developments in the Permian natural gas market.
Battered by a flood of new supply and limited pipeline takeaway capacity, prices for Permian natural gas and crude oil have spent a lot of time in the valley over the past 18 months. West Texas Intermediate (WTI) crude oil prices at the Permian’s Midland Hub traded as much as $20/bbl less than similar quality crude in Houston last year. That’s a big oil-price haircut that producers have had to absorb while ramping up production. However, the collapse in the Permian crude oil differential was tame compared to what happened with Permian natural gas prices. Prices at the Waha Hub in West Texas traded as low as negative $5/MMBtu, a gaping $8/MMBtu discount to benchmark Henry Hub in Louisiana. As bad as that all was, new pipeline takeaway capacity has arrived, and Permian prices are beginning to claw their way out of the depths. Today, we look at how new pipelines are impacting the prices received for Permian natural gas and oil.
Permian gas marketers were likely breathing a sigh of relief earlier this month when news came that the developers behind the Whistler Pipeline had made a final investment decision (FID) to proceed with the new 2.0-Bcf/d link between the Permian and South Texas. The project provides a crucial link in the gas takeaway picture for the Permian and makes it less likely that gas pipeline capacity constraints in the future will result in the negative prices that are plaguing the present-day gas markets in West Texas. Combined with the two other Permian greenfield gas pipelines that have taken FID — Kinder Morgan’s Gulf Coast Express (GCX) and Permian Highway Pipeline (PHP) — there is now ~6 Bcf/d of incremental Permian supply pointed at the Texas Gulf Coast over the next two years. That’s great news for Permian producers, as well as demand centers along the coast, where tremendous growth in LNG exports is under way. Today, we detail the third natural gas pipeline being built from the Permian to the Texas Gulf Coast.
