Permian region natural gas prices fall as production continues to grow

[thackney]

Permian region natural gas prices fall as production continues to grow
https://www.eia.gov/todayinenergy/detail.php?id=36673



The natural gas spot price spread between the Permian Basin, as priced at the Waha Hub in western Texas, and the U.S. national benchmark Henry Hub in Louisiana has grown considerably in the past year. Natural gas prices at Waha are nearly a dollar per million British thermal units (MMBtu) lower than Henry Hub prices. This spread widened as the ability to transport the increased natural gas production in the Permian Basin in western Texas and southeastern New Mexico was constrained by existing pipeline capacity.

Based on estimates in EIA’s most recent Drilling Productivity Report, production of natural gas in the Permian Basin averaged 10.4 billion cubic feet per day (Bcf/d) in June 2018, which was 2.1 Bcf/d more than in June 2017. Much of this increase in production is associated natural gas, or natural gas produced as a byproduct of the increase in oil production from oil-directed rigs. As a result, the increase in natural gas production closely correlated with the increase in crude oil production in the Permian Basin, which averaged 3.3 million barrels per day (b/d) in June 2018, up 0.9 million b/d from the June 2017 level.

As Permian Basin oil production grows, producers must find outlets for the associated natural gas. Once pipeline capacity is fully used, choices are limited. The widening price differential between Waha and Henry Hub indicates pipeline capacity is already somewhat constrained.

Producers may flare or vent the natural gas, although these disposal methods are regulated in Texas and New Mexico. Both states allow flaring from wells during drilling and immediately after completion. However, after a certain amount of time, producers can only flare natural gas after receiving exemptions from a state agency. If natural gas production continues to grow, and natural gas prices continue to fall, some producers in the area may cease oil production to avoid producing associated natural gas.

Two pipelines—Comanche Trail and Pecos Trail—were completed in 2017 to export Permian natural gas to Mexico. Although these pipelines have a combined takeaway capacity of 2.6 Bcf/d, they are not expected to see significant flows until late 2018 or early 2019 when downstream pipeline infrastructure in Mexico enters service. The only other project expected to come online in 2018 is the combined expansion of the North Texas Pipeline and resumption of service on the Old Ocean Pipeline, which collectively will increase pipeline capacity out of the Permian by 0.15 Bcf/d.

Several new pipelines are currently in development to carry natural gas from the Permian Basin to the Gulf Coast: the Gulf Coast Express Pipeline (2.0 Bcf/d capacity), the Permian to Katy Pipeline (1.7 to 2.3 Bcf/d capacity), and the Pecos Trail Pipeline (1.9 Bcf/d capacity). Of these three projects, only the Gulf Coast Express is under construction, with an expected in-service date of October 2019. The proposed pipelines from the Permian Basin are intended to meet Gulf Coast demand for natural gas, which includes new liquefied natural gas export facilities and regional industrial use.

[thackney]

https://www.eia.gov/naturalgas/weekly/archivenew_ngwu/2017/12_07/#itn-tabs-1

To date, three major natural gas pipeline projects have been announced, all of which anticipate completion by late 2019 or the first quarter of 2020:

Gulf Coast Express Pipeline (Kinder Morgan Texas Pipeline LLC, Targa Resources Corp., and DCP Midstream Partners LP), a roughly 500 mile, 1.92 billion cubic feet per day (Bcf/d) project connecting the Waha and Agua Dulce natural gas trading hubs

Permian-Katy (P2K) Pipeline (Sempra LNG & Midstream and Boardwalk Pipeline Partners), a 470-mile, 1.5 Bcf/d–2.0 Bcf/d pipeline that will bring West Texas natural gas to refinery, petrochemical, and LNG consumers on the Gulf Coast

Pecos Trail Pipeline (NAmerico Partners LP and Cresta Energy Fund I LP), a 468-mile, 1.85 Bcf/d pipeline terminating in Corpus Christi which will connect to both interstate pipelines and Cheniere’s Corpus Christi LNG facility that is currently under construction



Gulf Coast Express Pipeline Project
https://www.kindermorgan.com/pages/business/gas_pipelines/projects/kmtp/

Kinder Morgan started construction on the Gulf Coast Express Pipeline Project (GCX Project) in May 2018. The approximately $1.75 billion GCX Project is designed to transport up to 1.98 Bcf/d of natural gas from the Permian Basin to the Agua Dulce, Texas area and is now fully subscribed under long-term, binding transportation agreements. The project is expected to be in service in October 2019, pending the receipt of necessary regulatory approvals.

Permian-Katy Pipeline
http://p2kpipeline.com/

Sempra LNG & Midstream and Boardwalk Pipeline Partners are jointly developing the proposed Permian-Katy “P2k” natural gas pipeline project.

The approximately 495-mile, 42-inch pipeline project is proposed to transport up to 2.25 billion cubic feet per day (Bcfd) of natural gas from Waha Hub Headers in the Permian Basin to Katy and the Houston Ship Channel. The Texas Gulf Coast is one of the largest, most diversified natural gas markets in the world and the P2K project will promote additional demand and liquidity by delivering incremental and abundant Permian natural gas supplies within easy reach of this dynamic market center.

Pecos Trail Pipeline
https://www.namerico-energy.com/portfolio/energy/pecos-trail-pipeline/

The Pecos Trail Pipeline is slated to be operational in 2019, with anticipated deliveries into numerous intrastate pipelines in Texas, in addition to Spectra Energy’s Valley Crossing Pipeline, The NET Mexico Header, and the Cheniere Energy Corpus Christi LNG Header system, subject to shipper commitments.

[IsailedawayfromFR]

this looks like at least one pipeline is getting close to your place

@thackney

[thackney]

this looks like at least one pipeline is getting close to your place

@thackney

Just a bit to the west of us.  The Wilson Salt Dome Storage is in Wharton County.

http://p2kpipeline.com/wp-content/uploads/2018/06/P2K_MarketingDeck_062018.pdf

[Smokin Joe]

Relevant and related: Trump Administration Denies Pipeline Company Tariff Exemption

http://www.gopbriefingroom.com/index.php/topic,324866.msg1746674.html#msg1746674