Natural Gas Weekly: September 19, 2024
Flows – One project East Daley is monitoring closely is TC Energy’s (TRP) Bison XPress. The expansion would cap an effort by TRP and Kinder Morgan (KMI) to move more Bakken gas supply to the Rockies and relieve a growing constraint on Northern Border Pipeline.
Bison XPress will upgrade three compressor stations on Northern Border and modify Bison Pipeline to allow bidirectional flows. The project will add 300 MMcf/d of capacity from the Bakken to the eastern Rockies. Northern Border filed an environmental assessment for the project in April 2024 and is targeting start-up in 2026.
Bison XPress marks the second phase of coordination between TRP and Kinder Morgan to move more Bakken gas to the Rockies (referred to by KMI as the Bakken XPress projects). In Phase I, KMI started service on the Grassland South project in 4Q23, establishing a 93 MMcf/d interconnect between the Big Horn Gathering system in Wyoming and ONEOK’s (OKE) Bear Creek plant in North Dakota. KMI’s Wyoming Interstate Co. (WIC) subsequently leased the capacity opened through the Grassland South project to route gas onto the WIC system.
Like Grassland South, WIC has executed lease agreements with Northern Border, Bison, Fort Union Gas Gathering, and Big Horn to route the gas from the Bison XPress expansion onto the WIC system. KMI executed two agreements with Hess Trading (100 MMcf/d) and ONEOK Rockies Midstream (200 MMcf/d) to back the project.
Once gas from Bison Xpress reaches the eastern Rockies, two other expansions in the works will open more egress to the West. WIC has filed to construct the Cheyenne to Piceance Expansion and bring 180 MMcf/d online in 2Q25. Williams (WMB) is pursuing the Overthrust Westbound expansion to add 325 MMcf/d by December 2026.
New Bakken gas flows to the eastern Rockies could also move east on Rockies Express Pipeline (REX) and help ensure supply security to Midwest markets in the winter heating season. Midwest markets that source Rockies and Bakken gas will become a valuable option when LNG demand ramps up and reduces northbound volumes out of the Permian.
Infrastructure – Transcontinental Gas Pipe Line (Transco) has filed for an emergency permit to keep the Regional Energy Access (REA) expansion operating in the mid-Atlantic, despite an adverse appeals court ruling.
Owned by Williams (WMB), Transco on September 6 filed with FERC requesting a temporary emergency certificate of public convenience and necessity. The emergency certificate would keep REA facilities in service following a decision in New Jersey Conservation Foundation vs FERC vacating the permit.
Transco placed Phase 1 of the REA expansion in service in October ’23. The pipeline started service on the Phase 2 work on August 2, including work to compressors and meter stations in Pennsylvania and New Jersey. The project has a total capacity of 829 MMcf/d.
The latest Phase 2 start-up came just days after the US Court of Appeals for the District of Columbia ruled against FERC, finding that agency did not adequately address market studies showing the project is not needed when it certificated the project.
In the emergency request, Transco notes that the REA facilities provide other market benefits. The new facilities has been integrated into Transco's existing system and enables the flow of an additional 1.235 Bcf/d of "non-REA" flows. In total, the temporary certificate will ensure over 2 Bcf/d of volumes continue to flow through the REA facilities, Transco said.
Northeast gas prices hang in the balance as FERC considers the latest request. The value of the REA project will come into focus this winter when heating demand is in full swing. Winter weather in the Northeast creates demand spikes that have exposed bottlenecks in the pipeline network, such as between Transco Zone 6 and the Liedy hub in northern Pennsylvania. In recent winters, Transco Zone 6 has traded at a premium to Leidy-Transco, at times upward of $1.00/MMBtu. Keeping the REA expansion in operation should narrow the spread between Transco Zone 6 and Liedy spot prices this upcoming winter.
Flows – Hurricane Francine disrupted offshore oil and gas production in the Gulf of Mexico (GOM) during the week of September 9-16. Several platforms were evacuated ahead of the storm, including by large operators like Shell and Chevron.
GOM pipeline samples EDA monitors dropped by 42% W-o-W, from 2.4 Bcf/d for first week of September to 1.3 Bcf/d the week of the storm (see figure). Impacts continue to linger midweek in the daily pipeline samples for September 18, at 1.9 Bcf/d (~0.5 Bcf/d below the first week of September). Among operators, ExxonMobil (XOM) evacuated staff and shut-in production at its Hoover platform. Shell paused drilling operations at its Whale platform and later shut-in production at its Perdido and Auger platforms.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a 53 Bcf net injection into working gas for the week ending September 13. The surplus to the 5-year average would decrease by 27 Bcf to 269 Bcf while the surplus to last year would fall by 9 Bcf to 189 Bcf.
As the storage injection season draws to a close, East Daley projects another 576 Bcf will be injected through the end of October in the latest monthly Macro Supply & Demand Forecast. This equates to an average 70 Bcf/week injection over the next eight weeks, which would be very close to the 5-year average injection rate.
Hurricane Francine on balance should lead to a looser market and a larger storage injection due to demand destruction, though we won’t know until the following week’s EIA report. While platform evacuations started ahead of the storm, the main impact will be seen for the storge week ending September 20. Offshore gas production in the Gulf was down ~1 Bcf/d but we expect demand fell even more, mainly from delayed loadings at LNG export docks and lower power generation. On balance, the storm could lead to storage injection for the week ending September 20 up to 10 Bcf above normal.
Rigs – The US rig count decreased by 8 for the September 7 week, standing at 558. Basins losing rigs include the Permian (-6), Powder River (-2), Anadarko (-1) and Eagle Ford (-1). The large W-o-W drop in the Permian is most likely due to rig movements and should recover next week.
On the midstream side, Phillips 66 (PSX) is up 5 rigs total on its Anadarko, DJ and Permian systems. EnLink Midstream Partners (ENLC) is down 2 rigs on its Anadarko and Permian systems.
East Daley’s weekly Midstream 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 Midstream Activity Tracker.
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