The Shift, Part 2 - New Infrastructure Driving Flow and Price Changes in Texas Gulf Coast Gas Markets

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.

The changing nature of gas markets in the Houston Ship Channel (HSC) area and elsewhere along the Texas Gulf Coast has been on our radar for a while now. Last summer, in Part 1 of our Get Ready series, we laid out the general flow patterns for gas pipelines within Texas, focusing on how molecules make their way from supply regions such as the Permian and East Texas to hubs along the water, primarily HSC and South Texas. In Part 2, we pulled apart some of the drivers of the HSC price shift. At the time, prices at HSC had shifted to a discount versus the benchmark Henry Hub, after spending much of 2018 at a premium.

More recently, in Part 1 of the series we continue today, we outlined how new Permian gas supply has been making a meaningful impact on pricing at HSC. Today, we’ll quickly review the flow patterns of the Texas Gulf Coast gas markets and highlight how the HSC price weakness of late 2019 and early 2020 resulted in more gas being piped out of Texas to Louisiana. Then, we’ll discuss the latest developments in infrastructure with an eye on how they will continue to impact the gas markets in and near HSC.

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