Infrastructure – DT Midstream (DTM) is making quick progress on the company’s multi-phase LEAP expansion, adding more pipeline infrastructure in the ArkLaTex Basin.
On December 6, DTM announced early mechanical completion of Phase 2 of LEAP. The gathering line moves Haynesville gas from northern Louisiana to Gulf Coast markets. With the Phase 2 progress, DTM plans to make 400 MMcf/d of new capacity available for firm service on January 1, 2024.
DTM has been bringing on the LEAP expansion ahead of the project timeline. DTM began Phase 1 (+300 MMcf/d) at the start of September, two months ahead of schedule, and the new capacity filled immediately. The start of Phase 2 will bring the total capacity of LEAP to 1.7 Bcf/d. The Phase 3 expansion (+200 MMcf/d) is expected to begin service in 3Q24.
In addition to LEAP, DTM is working on two other infrastructure projects in the Haynesville. A new 1 Bcf/d LEAP interconnect with TC Energy’s (TRP) Gillis Access project will expand LEAP’s market connectivity to 3.6 Bcf/d along the Louisiana LNG corridor, with optionality to supply various LNG projects in the region. DTM is also building a 400 MMcf/d supply interconnect to the Blue Union gathering system with a third-party processing plant near Carthage, TX. Blue Union is in the process of expanding to 2.6 Bcf/d by 1Q24, but is currently flowing only ~1.7 Bcf/d, meaning there is ample spare capacity to connect new customers.
Flows – After posting a big jump in November, East Daley’s ArkLaTex samples are down 463 MMcf/d M-o-M to a yearly low of 12.6 Bcf/d in December. ArkLaTex pipeline samples averaged 13.1 Bcf/d in November.
Last month, we noted the East Texas side of the Haynesville accounted for all the growth in November. That trend has reversed through the first two weeks of December, with the East Texas pipeline sample down 160 MMcf/d M-o-M. The Louisiana sample, which was flat in November, has dropped by just over 300 MMcf/d.
Most of the declines in December have come on ETC Tiger Pipeline, the Natural Gas Pipeline Company of America (NGPL), and Texas Eastern Transmission systems. However, nearly every pipeline we track in the basin has seen small declines in the daily samples, indicating the decline is real and not a result of shuffling volumes.
In the ArkLaTex Supply and Demand Forecast, EDA has been calling for basin production to decline since July ‘23 due to low natural gas prices and falling drilling activity. Our latest forecast predicts wellhead production to fall to 17.4 Bcf/d by March ‘24 in the basin from a recent peak of 18.2 Bcf/d in May ‘23. Rig counts overall averaged 52 in November, down from 75 rigs at the start of the year. We model ArkLaTex production to continue declining through March ‘24, with significant rig adds starting in January ‘24 in anticipation of stronger gas prices next year.  Based on the observed rig trends, we are forecasting a larger decline in the Louisiana side of the Haynesville, with production bottoming out as late as June ’24. However, these declines are partially offset by growth in East Texas.
Storage – Traders expect the Energy Information Administration (EIA) to post a -52 Bcf storage withdrawal for the December 7 week, according to a survey by John Sodergreen’s The Desk. The 5-year average withdrawal for the week is -81, so the surplus to the 5-year average could widen to as much as 263 Bcf. East Daley views that level as supportive of our current December Henry Hub spot price forecast of $2.75/MMBtu in the Macro Supply and Demand Forecast.
With mild weather in forecasts for the balance of December, storage withdrawals will likely be much smaller than a typical December and less than the 5-year average withdrawal of 371 Bcf for the month. Expectations for the balance of December vary, but in the absence of cold weather, East Daley believes the final three weeks (ending December 14, 21, and 28) could see slightly more than 300 Bcf withdrawn in total. A withdrawal of that size would leave storage levels at ~3,450 Bcf entering January ‘24, the highest inventory since the week ending December 30, 2011.
Rigs – US rigs remained flat W-o-W with the total rig count holding at 596. The Permian, Powder River and Anadarko are down 1 rig each. The Eagle Ford and Marcellus + Utica are up 1 rig each.
On the midstream side, Western Midstream (WES) lost 5 rigs total with reductions on its Permian, Powder River and Eagle Ford systems. Kinetik Midstream (KNTK) gained 2 rigs on its Permian Basin system.