Permian midstream development activity has been happening at a rapid pace over the past few years, and we’ve featured many of those projects in the RBN blogosphere. One of the most aggressive players has been Salt Creek Midstream, which is in the midst of a big Permian buildout focusing on natural gas, crude oil, natural gas liquids and even produced water. Salt Creek isn’t only developing local midstream infrastructure; it’s also at work on long-haul solutions that will enable Permian producers to access markets along the Texas Gulf Coast — a wellhead-to-water strategy, you might call it. Helping Permian producers meet their needs to take away all three hydrocarbons plus produced water with integrated transport and pricing options is the key to Salt Creek’s effort. Today, we dive into the details of the company’s expansive Permian infrastructure development plan.
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.
This much seems clear: natural gas demand along Texas’s Gulf Coast will be rising sharply, as will gas supply from the Permian and other inland plays to the coast. The catch is that, like clumsy dance partners, the increases in demand — mostly from new liquefaction/LNG export terminals and Mexico-bound gas pipelines — and the incremental supply to the coast via new, large-diameter pipes from the Permian are likely to be out of sync. That shifting imbalance, in turn, may well cause volatility in Houston Ship Channel gas prices as they relate to Henry Hub. In fact, we’re already seeing signs of what’s to come. Today, we continue our look at upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply-demand balance.
When it comes to Texas natural gas markets, the Permian has been getting much of the attention lately, with its rapid supply growth, limited pipeline takeaway capacity and sometimes negative prices. However, a wave of gas infrastructure development just starting to come online along the Texas Gulf Coast is set to steal some of the Permian’s spotlight over the next few months. Two large liquefaction/LNG export facilities are ramping up on the coast, as are the pipeline reversal projects designed to supply them. Also, three announced Permian-to-Gulf-Coast gas pipelines slated for completion over the next 24 months will move supply cross-state to destinations spanning the area from the Houston Ship Channel to the Agua Dulce Hub near Corpus Christi. That’s a lot of change ahead for these key Texas gas markets. Today, we turn our attention downstream of the Permian to the Houston Ship Channel market, including upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply and demand balance.
There’s never a dull moment in the Permian gas market these days, as prices at the major trading hubs remain extremely volatile, fueled by insufficient natural gas pipeline takeaway capacity. After prices tumbled to fresh lows in late April, with the Waha hub trading as much as $9/MMBtu below zero, the market appeared to regain its footing somewhat in early May as production curtailments lifted prices above zero. However, that reprieve was short-lived; prices last week again fell into negative territory heading into Memorial Day weekend. That said, the possibility of new takeaway capacity materializing in the weeks ahead, earlier than expected, has renewed hope among some market participants that the Permian gas price woes will soon be a thing of the past. How likely is that really, and will it be enough to equalize the beleaguered market? Today, we look at potential near-term developments that could support Permian gas prices.
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.
It’s said that everything is bigger and better in Texas, and when it comes to the magnitude of negative natural gas prices, the Lone Star State recently captured the crown by a wide margin. By now, you’ve probably heard that Permian spot gas prices plumbed new depths in the past couple of weeks, falling as low as $9/MMBtu below zero in intraday trading and easily setting the record for the “biggest” negative absolute price ever recorded in U.S. gas markets. Certainly, that was bad news for many of the Permian producers selling gas into the day-ahead market. But every market has its losers and winners, and negative prices were likely “better” — dare we say much better — for those buying gas in the Permian. Today, we look at some of the players that are benefitting from negative Permian natural gas prices.
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.
Permian natural gas markets felt a cold shiver this week, but not a meteorologically induced one of the types running through other regional markets. Gas marketers braced as prices for Permian natural gas skidded toward a new threshold: zero! That’s not basis, but absolute price, a long-anticipated possibility that became reality on Monday. The cause is very likely driven, in our view, by continued associated gas production growth poured into a region that won’t see new greenfield pipeline capacity for at least 10 months. What happens next isn’t clear, but expect Permian gas market participants to be a little excitable or jittery over the next few months. Today, we review this latest complication for Permian natural gas markets.
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.
Permian natural gas fundamentals were rocked with some major infrastructure news on Monday, when Kinder Morgan announced its plans to build the 2-Bcf/d Permian Highway Pipeline (PHP) from Waha to the Texas Gulf Coast. The announcement revealed that EagleClaw Midstream, a Blackstone Energy Partners portfolio company, has signed a letter of intent to become a 50% owner in the project and commit natural gas volumes to the pipeline. Adding firepower to the project, Apache Corp. is committing significant volumes to the pipeline too, with an option to take an ownership stake. While Kinder Morgan and EagleClaw Midstream stopped short of a final investment decision (FID), the destination flexibility that PHP’s tie-ins with other key pipes offer makes the project a major contender in the race to become the second new long-haul natural gas pipeline out of the Permian. Today, we discuss the latest infrastructure development in the Permian natural gas market.