Flows – Storage has been the story of the West Coast market this winter. The Pacific region (Washington, Oregon and California) ended November ’24 with 310 Bcf in storage, the highest inventory entering a winter since 2020, according to Energy Information Administration (EIA) data. As a result, flows in the West are taking on new dynamics this year.
In recent winters, Rockies Express Pipeline (REX) has been the key route to supply additional gas to the West. REX played a pivotal role following an explosion on Line 2000 of the El Paso Natural Gas system in August 2021. The incident took ~600 MMcf/d of capacity offline for nearly 18 months, leaving the West Coast market exposed during a cold 2022-23 heating season. Spot prices in California topped $50/MMBtu that winter as regional storage rapidly depleted, but the massive price spreads also drew gas westward on REX across the Rocky Mountains. The region has continued to rely on REX to meet peak winter demand, even after Line 2000 returned to service in 1Q23.
But this season, REX has been de-prioritized. After last year’s warmer-than-average winter and a push to restock inventories over the summer, Pacific region storage has been ample enough to meet demand without pushing prices to extremes. Not surprisingly, lower West Coast prices have failed to incentivize westward flows on REX this winter. The pipeline in January and February ’25 flowed nearly 350 MMcf/d eastward from Colorado into Wyoming, after flowing more than 600 MMcf/d westward over the same period last year (see figure).
Entering March, the Pacific region still has about 60% of the working gas volumes from November in storage, which should be sufficient to get through the season without westward flows from REX. Basis prices, therefore, are likely to remain low to negative into the shoulder season.
The priority on storage gas has been in the works for several years now. The West Coast has developed a pronounced summer bump in volumes as utilities work to refill storage. Rather than using REX to move additional gas west when demand and prices are high, shippers have leaned on REX the last two years as a means to refill storage when prices and demand are lower in the summer. If this trend continues, REX will likely not flow westward in 2025 until warmer weather decreases demand in the West. Only once prices drop in the summer will REX begin flowing westward regularly again to restock storage inventories.
Infrastructure – Pipeline operators have advanced several deals recently to supply data centers under development in Texas, adding to momentum for the emerging demand sector.
New Era Helium (NEHC) is negotiating a gas supply contract to fuel a 250 MW data center under development in Ector County, TX, the company said February 27. NEHC has signed a letter of intent with Sharon AI to form a joint venture, Texas Critical Data Centers, to develop the data center campus on 200 acres outside Odessa. The site is near key infrastructure, NEHC said, including fiber optic cable, two gas transmission lines and COâ‚‚ pipeline.
NEHC intends to supply gas to the data center from its 20 MMcf/d processing plant in the Pecos Slope Field in southeastern New Mexico. NEHC and the JV expect to finalize a gas supply contract in 2Q25 and bring the first project phase online in late 2026.
Earlier in February, Energy Transfer (ET) announced a 450 MMcf/d supply contract with CloudBurst Data Centers for a data center it is developing outside Austin. ET’s Oasis Pipeline will deliver the gas for a planned 1.2 GW generation facility to power the data center campus near San Marcos, TX. The contract is contingent on a final investment decision by CloudBurst in 2024, with operations expected to start in 3Q26.
These latest projects confirm emerging new demand for AI in the gas sector. East Daley forecasts 4.2-6.1 Bcf/d of new demand by 2030 from nearly 300 AI-related power projects. Users can track these projects in the Data Center Demand Monitor, shown in the image above. The Data Center Demand Monitor is available as part of the Macro Supply & Demand package.
Infrastructure - Infrared satellite imagery of the Corpus Christi LNG site from March 1 continues to show a small heat signature at Midscale Train 1 as commissioning of the Stage 3 expansion moves forward. Cheniere Energy announced in December ’24 that Train 1 of the midscale project had achieved first liquefaction, and was on track to substantial completion by the end of 1Q25.
There has been little change to interstate volumes supplying the Corpus Christi LNG facility as the expansion project works through commissioning. The additional flows supplying the Stage 3 expansion are likely coming through the new ADCC intrastate pipeline, which delivers gas to the facility from the Agua Dulce hub in South Texas. The ADCC line receives gas from the Whistler, GCX, EOG Verde, and Enterprise Corpus pipelines.
In Cheniere’s 4Q24 earnings called last month, the company said the Stage 3 expansion project is ahead of schedule and anticipates substantial completion of all seven trains in the second half of 2026.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a 99 Bcf storage withdrawal for the week ending February 28. A 99 Bcf draw would be 5 Bcf greater than the 5-year average and would expand the deficit to 243 Bcf from 238 Bcf. The storage deficit vs last year expanded to 561 Bcf last week and would move deeper into deficit territory to 604 Bcf.
February withdrawals are on track to total 656 Bcf (23.4 Bcf/d). This would rank as the 17th largest monthly withdrawal of all time and the fourth-largest February withdrawal on record, behind only February 2021, 2015 and 2014.
March withdrawals typically come in much lighter as temperatures warm and consumers use less gas for heating. March 2013 and 2014 saw the two largest monthly withdrawals at 379 and 344 Bcf respectively. In the latest Macro Supply & Demand Report, East Daley anticipates that March 2025 will see about 220 Bcf of withdrawals. The 5-year average withdrawal for the month is 106 Bcf, but this is skewed by two incredibly warm months (last year and March 2021). We believe 220 Bcf is a reasonable forecast given the past trajectory of this winter and normal March weather.
Flows - Natural gas pipeline samples rose 3.4% W-o-W for the March 2 week, from 67.8 Bcf/d to 70.1 Bcf/d. Total US pipeline volumes have bounced back from last week but are still ~400 MMcf/d below February's peak levels.
Liquids basins experienced the most significant growth, up 8.7%. The Anadarko Basin saw the steepest rebound, averaging a gain of ~840 MMcf/d. The Permian Basin, despite a weak correlation between pipeline samples and actual production, also grew 3.6%. However, this may be overstating any real production change.
Gas basin samples increased 1.7%, with most of the gains coming from Appalachia (~800 MMcf/d) while the Haynesville grew only ~200 MMcf/d. These two basins will be crucial to monitor in the coming months, as we expect them to ramp up production to meet growing demand. This is particularly important as total US storage has fallen below the 5-year average following substantial withdrawals in February.
Rigs – The US rig count decreased by 4 for the February 22 week, standing at 546. Basins losing rigs include the Permian (-5), Marcellus+Utica (-2), Bakken (-1) and Barnett (-1). The Anadarko, ArkLaTex and Marcellus - NE PA each added 1 rig on the week.
On the midstream side, Targa Resources (TRGP) is down 3 rigs net with reductions on all its Permian and Eagle Ford systems. Energy Transfer (ET) is also down 3 rigs total on its Permian and Bakken systems.
East Daley’s weekly Rig Activity Tracker monitors rig activity by basin and by gathering and processing (G&P) system to better understand midstream impacts. We allocate rigs and monitor flows through 150+ public and privately owned G&P systems in every North American basin. Reach out for more information on the Rig Activity Tracker.
The Daley Note
Subscribe to East Daley’s The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices, and EDA research likely to affect markets in the short term.