The Daley Note: October 4, 2023
Shippers on Permian natural gas pipelines have contended with an eventful outage schedule recently, though you wouldn’t necessarily know it based on price moves. The lack of volatility suggests pipeline capacity leaving the Permian has loosened up, likely from a new expansion of Whistler Pipeline.
East Daley Analytics recently reported a 0.5 Bcf/d expansion of Whistler Pipeline went live at the start of September, according to a market source. The project adds three compressors to the 42-inch pipeline running from the Waha hub in the Permian to Agua Dulce in South Texas, taking total capacity to 2.5 Bcf/d.
Owned by I Squared Capital and MPLX (MPLX), Whistler has not confirmed the project's in-service. As an intrastate pipeline, Whistler does not face the same disclosure requirements as interstate systems.
Start-up of the Whistler expansion would help explain how Permian Basin natural gas prices have held up reasonably well in the last month despite several high-profile pipeline outages.
The Permian Highway Pipeline (PHP) went offline unexpectedly for four days in mid-September, dropping pipeline egress by 2.1 Bcf/d. East Daley noted that prices were relatively stable during the event, trading $0.66-0.82/MMBtu behind the Henry Hub benchmark. By contrast, Waha gas prices plunged into negative territory twice recently, in late July and May 2023 amid similar or even smaller maintenance events (see chart).
Other outages have obstructed Permian gas recently. The El Paso Natural Gas system experienced a force majeure event at the Roswell compressor station from September 20-27, curtailing some flows to the Southwest. PHP operator Kinder Morgan (KMI) also has reduced mainline capacity from September 27 - October 4, limiting average capacity to 1.66 Bcf/d over this period. The largest outages on PHP were scheduled for October 3-4, cutting service by 750 MMcf/d for two days.
Despite these disruptions, Waha gas traded in a tight range of $1.75-1.90/MMBtu last week, or $0.74-1.00 behind the Henry Hub. Waha was trading $1.18-1.22 behind the Henry Hub early this week (October 2-3) amid the steeper PHP curtailments, still a far cry from the volatility seen earlier this year. The start of the Whistler expansion could be cushioning Permian producers from deeper discounts. – Andrew Ware Tickers: KMI, MPLX.
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