Natural Gas Weekly: September 12, 2024
Flows – The new Blackcomb Pipeline will help resolve takeaway issues from the Permian Basin but will likely create other problems moving gas downstream, according to East Daley Analytics’ latest regional models covering the Permian and Texas Gulf Coast.
On July 31, WhiteWater Midstream announced Blackcomb and a final investment decision (FID) between the Whistler Pipeline JV (WhiteWater, MPLX and Enbridge (ENB)) and Targa Resources (TRGP). East Daley includes Blackcomb in our new supply and demand forecasts for the Permian Basin and Houston Ship Channel, released this week. We model linefill on Blackcomb starting in July 2026 and ramping to a full 2.5 Bcf/d by December ’26 to the Agua Dulce hub.
The Permian Basin is a reliable source of supply for South Texas, a role bolstered by recent compression expansions (PHP, Whistler) and two 42-inch projects ahead (Matterhorn, and now Blackcomb). EDA expects pipeline utilization on these eastbound routes to remain high as Permian supply continues to grow.
Rapid growth in Permian flows has saturated the South Texas market in recent years, leading to wide basis differentials between Houston Ship Channel and Carthage. Pipeline capacity from the Permian to South Texas increases to 11.4 Bcf/d in 2025 after start-up of Matterhorn Pipeline, and to 14 Bcf/d in 2027 once Blackcomb comes online, up from just 3.4 Bcf/d in early 2019.
We expect limited demand growth in 2024, so additional inbound flows from the Permian will need to displace inbound supply from the Carthage market in East Texas. In the Houston Ship Channel Supply & Demand Forecast, we reduce flows from Carthage to Houston by 1-2 Bcf/d from 2024-28 to balance the South Texas market, indicating Houston will trade at a discount to Henry Hub. Carthage will provide swing supply in 2029-30 as LNG demand in South Texas comes online and additional pipeline capacity from Texas to Louisiana is available to support LNG projects on the TX/LA border.
See the latest Houston Ship Channel Supply & Demand Forecast for more information.
Infrastructure – The oil and gas industry is bracing for a strike from Hurricane Francine through central Louisiana, potentially impacting operations at several LNG facilities.
Hurricane Francine was expected to make landfall Wednesday evening (September 11) as a Category 1 hurricane. The system was forecast to make landfall west of New Orleans and bring only tropical storm conditions to Cameron Parish, where Cameron LNG, Sabine Pass, and Calcasieu Pass operate. Plaquemines LNG, the nearly complete facility in Plaquemines Parish on the eastern edge of Louisiana, should also be spared the worst of the hurricane.
East Daley is keeping a particularly close eye on Cameron LNG, which does not have onsite power generation and is therefore more susceptible to damage to local power infrastructure. The facility was taken offline for about two weeks when Hurricane Laura hit Cameron Parish in 2020.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a 47 Bcf injection into working gas for the week ending September 6. The surplus to the 5-year average would fall by 21 Bcf to 302 Bcf while the surplus to last year would fall by 3 Bcf to 205 Bcf. Working gas totaled 3,347 Bcf as of August 30.
In the latest monthly Macro Supply & Demand Forecast, East Daley projects the surplus to the 5-year average will fall to 172 Bcf by the end of October. The surplus would need to fall by 151 Bcf over the next eight weeks to reach that level, or 18.8 Bcf per week. The 6- to 10-day weather forecast for the Lower 48 shows above-average temperatures ahead west of the Mississippi, but mostly below-average temps for the western US.
Rigs – The US rig count was unchanged for the August 31 week, holding at 568. Basins losing rigs W-o-W include the Permian (-4), Eagle Ford (-2), DJ (-1) and Uinta (-1). Basins gaining rigs on the week include the ArkLaTex (+3), Anadarko (+1), Marcellus- NE PA (+1) and Marcellus+Utica (+1).
On the midstream side, Kinetik (KNTK) is down 3 rigs on its Raptor and Durango systems in the Permian. ONEOK (OKE) gained 2 rigs total on its Bakken and Powder River 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.