The basis blowout at the Waha Hub in the Permian Basin arrived in full force over the last few weeks, with natural gas prices reaching discounts to the Henry Hub not witnessed since 2009. Available takeaway capacity has been quickly eroding on the existing pipeline corridors out of the basin, leaving many in the market pondering where all the incremental gas production will go before a new greenfield expansion pipe relieves the market in late 2019. Last week, a partial answer came in the form of a pipeline expansion project by Enterprise Products Partners and Energy Transfer Partners slated for completion later this year. While the project’s estimated size is far too small to preclude additional greenfield pipelines beyond 2019, it does highlight the attractive economics of brownfield expansions on the Texas intrastate pipelines at Waha. Today, we analyze announced and possible intrastate pipeline projects around Waha.
Posts from Jason Ferguson
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.
Mexico’s natural gas pipeline network is entering a crucial phase of expansion with the expected completion of the La Laguna-Aguascalientes and Villa de Reyes-Aguascalientes-Guadalajara pipelines later this year. These new pipelines will be linked together with the existing Roadrunner, Tarahumara and El Encino-La Laguna pipelines to form the second largest integrated natural gas transportation network in Mexico. This system will link central Mexico with the northwestern part of the country, which is already supplied by gas flowing in from the Waha Hub on the U.S. side of the border and provide additional demand markets for Permian Basin natural gas. Fermaca, a Mexico City-based company, is constructing the new route, and its marketing affiliate, Santa Fe Gas, is actively building a natural gas marketing business within Mexico. Today, we examine Fermaca’s natural gas marketing affiliate and its role in bringing new supply from the U.S. to Mexico’s natural gas market.
Mexico’s natural gas market continues to evolve rapidly. New pipelines are being built to move increasing volumes of U.S.-sourced gas to Mexican power plants, industrial customers and other end users. Gas exports from the U.S. to Mexico already average 4.5 Bcf/d and those volumes are sure to rise as more pipelines and power plants come online. Just as important, the government of Mexico has been taking aggressive steps to undo what had been state-owned Petróleos Mexicanos’s (Pemex) near-monopoly on gas pipeline capacity and to encourage a large and diverse group of gas marketers to enter the fray. Today, we examine ongoing efforts to increase transparency, pipeline access and competition in the gas market south of the border, and look at how Comisión Federal de Electricidad’s (CFE) marketing affiliate, CFEnergía, is growing its gas marketing business within Mexico.
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.
In the short term, Permian natural gas will be dealing with the aftermath of Harvey and what it might do to associated gas production from crude oil wells being curtailed due to refinery downtime and storage capacity issues. But that will soon be behind us, and at that point Permian natural gas production will resume its steep upward trajectory. Just a few months ago, the gas market was still sharpening pencils on potential gas takeaway constraints in West Texas, but congestion in the Waha gas market now appears as likely as another winning season for Alabama football. Where will this tide of natural gas end up? Until a few days ago, the Agua Dulce Hub in South Texas was Number 1 on the list, but a new project has thrown the Katy Hub into the mix as a potential destination. Today we analyze an interesting approach to relieving Permian natural gas market constraints.
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.
There is no doubt that the epicenter of U.S. associated natural gas production growth is the Permian, where dry gas output has increased from 3.5 Bcf/d in 2012 to more than 6.5 Bcf/d today. And there is a lot more where that came from. RBN’s Growth Scenario indicates that as much as 12 Bcf/d of natural gas production could be surging out of the Permian by 2022, with less than 1 Bcf/d of that needed for local demand. All of that incremental production will need to move out of the region, either on existing or new pipelines. Permian gas is such a big deal that RBN has developed a brand new weekly report focused specifically on the topic — how much is produced, where it is processed, its destination markets, how it is priced and, most importantly, how the Permian gas market will balance out, both today and in the coming months. Today we take you on a tour of RBN’s NATGAS Permian report five days before we close our inaugural report preview period — it’s your last chance! If it is not obvious, today’s blog is a blatant advertorial for our new report.
The current phase of Mexico’s natural gas pipeline buildout, led by the country’s Comisión Federal de Electricidad (CFE), is nearing completion. With 22 new pipelines built or under construction, the effort has dramatically reshaped Mexico’s natural gas supply portfolio. The capacity of the pipeline network within Mexico has been tripled with the addition of 18 new pipelines, while four new pipelines on the U.S. side of the border will add almost 6 Bcf/d of export capacity by late 2018. As part of the building spree, CFE also initiated development of two new gas headers to be built in Texas: a 6-Bcf/d header at Waha in West Texas that was recently completed by a consortium of Carso Energy, MasTec, and Energy Transfer and the 5-Bcf/d Nueces Header, now under construction by Enbridge at Agua Dulce in South Texas. Today, we discuss CFE’s Nueces Header and its role in moving more gas south.
The Waha Hub in West Texas figures to play a prominent role in supplying natural gas to Mexico soon, as pipelines connecting the Permian Basin to the international border are now complete and supplying small volumes to Northwest Mexico. As additional pipelines and power plants come online south of the border over the next 12 months, a meaningful ramp-up in flows from Waha to Mexico is expected. Facilitating those flows will be a Waha-area header recently built by a consortium of Carso Energy, MasTec and Energy Transfer Partners for Mexico’s Comisión Federal de Electricidad (CFE). With 6 Bcf/d of capacity and multiple pipeline interconnects, the header stands to dramatically improve interconnectivity among gas pipelines at Waha, but it has largely stood in the shadows of Mexico’s pipeline buildout. Today we continue our series on the Waha Hub with a look at CFE’s Waha header and its expected role in handling Permian-sourced gas.
Booming Permian natural gas production has increasingly stressed pipeline takeaway in recent months as volume rose to more than 6 billion cubic feet per day (Bcf/d) — up almost 1 Bcf/d from the year-ago level. The production surge has broadened price spreads not only between Waha and other regional hubs, but also within the Permian between Waha and its sister hub, the El Paso Pipeline-Permian price pool. Creative midstream solutions are aimed at relieving these constraints, both in the form of long-haul takeaway and intrabasin pipelines. Of the latter form, few projects have moved with the speed and size of WhiteWater Midstream’s Agua Blanca. Today we continue our series on the Waha Hub with a look at intrabasin Permian midstream gas flows and how Agua Blanca is expected to keep them moving.
Of the six interstate pipelines that account for most of the natural gas crossing the Texas/Louisiana state line, two have net flows that are westbound into Texas––something that would have been unthinkable just a few years ago. By the end of this decade—and maybe far sooner—Texas will be receiving more gas from Louisiana than vice versa, mostly due to planned pipeline reversals aimed at moving more Marcellus/Utica gas to Texas export markets. Today we continue our look at changing Texas gas flows, this time with a focus on the half-dozen most important pipelines at the Texas/Louisiana border.
The natural gas flow patterns that characterized the U.S. energy-delivery sector for the decades preceding the Shale Revolution are gradually being undone, and few, if any, states are more affected by these changes than Texas. The state remains the nation’s largest natural gas producer, and it still produces nearly twice as much gas as its consumes within its borders. But traditional Northeast and Midwest markets for Texas gas are being ceded to Marcellus/Utica producers, and more and more Northeast gas is flowing south/southwest to the western Gulf Coast, drawn by power/industrial demand, new LNG export terminals and rising pipeline-gas exports to Mexico. Today we begin a look at the dramatic shifts in gas flows out of Texas through key gas pipeline exit points.
It’s been a volatile summer for U.S. natural gas. The CME NYMEX front month contract spiked from $1.96/MMBtu in late May to $2.99 on July 1, up more than 50% in just over a month. Since then the price has headed mostly south, closing at $2.62/MMBtu on Tuesday, down $.37/MMBtu from its summer high a few weeks ago. As often is the case, the primary culprit has been weather. But for the first time, a new factor is starting to have an impact: LNG exports. During August, approximately 30 Bcf of gas will likely flow into Cheniere Energy’s Sabine Pass for now-routine LNG exports from Train 1 and the initial volumes needed for the start-up of Train 2. The more recent decline in gas prices just happened to follow the announcement that the entire Sabine Pass LNG facility will be shut down for several weeks starting next month for maintenance and to address a design issue. Was LNG a factor in the price decline? Hard to say. We may get a better sense of the market impact of LNG exports when the plant starts back up. At that point even more gas –– up to 1.25-1.5 Bcf/d in total –– could be sucked out of the market, possibly taking a 125-Bcf bite out of supply by the end of this year. The gas market has changed. From here on out, you won’t be able to understand the U.S. natural gas market without a solid grasp of LNG export dynamics. Today, we begin a two-part series on how international demand for U.S.-sourced LNG will have an increasing effect on gas supply, demand and price.