Feed Me - Uri Scrambles Gulf Coast Gas Flows, Briefly Shuts Off Texas LNG Feedgas
https://rbnenergy.com/feed-me-uri-scrambles-gulf-coast-gas-flows-briefly-shuts-off-texas-lng-feedgas02/23/2021
...The Lone Star State has a vast network of gas pipelines, the largest in the country in fact, including nearly 430,000 miles of regulated and non-regulated intrastate pipelines — systems that are entirely within state boundaries — and almost 20,000 miles of interstate gas transmission pipeline. Together the combination of production and gathering, distribution, and transmission lines account for one-sixth of the total U.S. gas pipeline network, according to the Railroad Commission (RRC) of Texas. Many of the transmission lines that criss-cross the state, east-west or north-south, are bidirectional, including the interstate pipelines. These interstate systems historically flowed only northbound but have been modified in recent years to also flow south as an influx of supply from Appalachia’s Marcellus/Utica shales has displaced Texas’s outflows from markets in the U.S. Southeast and, to some extent, in the Midcontinent, and as the build-out of LNG export terminals has increased gas demand along the Gulf Coast.
Despite the extensive pipeline network, it’s not surprising that an event like Winter Storm Uri, which generated record demand, would create constraints on these legacy pipes, particularly for gas coming into the state. That’s because they were built to “telescope†in the wrong direction for today’s market — they were originally designed to take on increasing amounts of gas supply as they moved northeast toward Louisiana, so the pipeline diameter and, thus, capacity gets smaller the farther south they go (see our Miles and Miles of Texas series for more on Texas pipeline network evolution). So even with the bidirectionality, capacity is limited, and that’s without the cold weather-related issues that physically limited the pipelines’ ability to flow at high rates. As for pipes crossing the state east to west, those are primarily fed by Permian Basin gas supply, and as we noted in East is East, West is West, freeze-offs severely crippled those volumes during Uri.
The diagram in Figure 1 shows the key gas hubs in Texas and the dominant directions of flows from each.
...Permian Outflows Plummeted. Last week in East is East, West is West and Terminal Frost, we discussed the severe production shortfall that occurred due to freeze-offs and contributed to the shortage. Much of that supply has since bounced back, according to the latest data from the RBN NATGAS Permian Report (see the dark-blue 2021 line in left graph, Figure 2). As production volumes fell off earlier last week, however, and Waha Hub spot prices screamed higher to more than $200/MMBtu in trading for February 17, outflows cratered, dropping to less than a fourth of what they were averaging year-to-date before the winter storm.
Total outflows went from an average 11 Bcf/d across pipelines year-to-date before Uri, to a low of about 2.5 Bcf/d on February 16. The right graph in Figure 2 breaks out the volumes by direction of flow. Flows east via the three intrastate corridors combined (yellow line), which make up the largest chunk of Permian exports, fell the most volume-wise — from upwards of 6 Bcf/d on average pre-Uri, to barely above 1 Bcf/d on February 15-17 (low point inside dashed blue rectangle) — but those remained the highest volumes among the corridors as the gas-starved Houston and Dallas markets priced to attract whatever molecules they could (the cash price at HSC averaged $400/MMBtu in trading for gas day February 17, carrying a stout $200/MMBtu premium to Waha for that day, according to NGI’s daily spot price index; more on HSC when we get to Gulf Coast gas flows in a bit).
Flows on the other corridors dropped to minimal levels and, in the case of the North and West corridors, flows even reversed to move more gas into Texas. Flows north (gray line, right graph) had averaged right around 1 Bcf/d in January and increased to about 1.5 Bcf/d in early February as a cold snap increased demand in the Midwest. As the polar air plunged into Texas, those volumes declined and flipped to net inbound, with as much as 400-500 MMcf/d coming into the Permian/Texas area for a couple of days (February 17-18)....