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.
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 Basin natural gas production is growing at a torrid pace. After starting 2017 just below 6 Bcf/d, production is set to breach the 8-Bcf/d mark soon on its way to 10 Bcf/d by the end of 2019. Pipelines flowing out of the basin are coming under increasing strain, and just about every single gas pipeline leaving the Waha hub in West Texas is now being utilized at levels not witnessed in years — if ever. Even routes north from the Permian to the Midcontinent and Midwest markets, traditionally only attractive on the coldest winter days, are starting to look viable year-round. Today, we look at recent gas-price and flow trends in the Permian natural gas market.
Permian natural gas production recently topped 7 Bcf/d and shows no signs of slowing its growth trajectory. While new pipelines are expected to move additional Permian gas volumes to the Gulf Coast markets by the beginning of 2020, the current paths to those markets are full. Over time, Mexico is expected to export significant volumes directly from Waha, but current amounts are relatively small. As a result, increasing volumes of gas are leaving the Permian on the pipelines that head west to California and north to the Midcontinent. However, the pricing in these markets is downright ghoulish compared to the Gulf Coast and Permian gas is increasingly finding itself in scary market conditions. Today, we analyze recent pricing and flow trends in the Permian natural gas market.
The surge in crude oil, natural gas and natural gas liquids (NGL) production in the Permian is driving a massive buildout of midstream infrastructure designed to move the hydrocarbons to end-use markets. On the gas processing front, there are literally dozens of projects announced or in the planning phase that are scheduled to start up over the next two years. Some are small projects aimed at a few producers, while others are set to significantly expand processing capacity and affect large areas of the basin’s gas gathering and transmission network. Today, we discuss Vaquero Midstream’s ambitious Delaware Basin gathering and processing projects.