Natural Gas Weekly: March 20, 2024
Production – East Daley Analytics has lowered our 2024 gas production forecast as low prices prompt producers to delay new wells or shut-in production. The toll of sub-$2/MMBtu gas is evident in pipeline samples, which have fallen in March.
In our latest Macro Supply and Demand Forecast, EDA models total US gas supply (Lower 48 production + imports) to average 111.9 Bcf/d in 2024, down from a previous forecast of 112.7 Bcf/d (see figure).
Appalachia is the primary driver of changes to our monthly forecast, specifically in Pennsylvania. EQT has shut-in ~1 Bcf/d of production in response to low prices, accounting for most of the near-term decrease.
US pipeline samples have averaged 70.4 Bcf/d to date in March, ~3 Bcf/d lower from the February ’24 average. We have seen residue samples decline by ~1.3 Bcf/d M-o-M in Pennsylvania alone, accounting for ~40% of the total US decline.
Additionally, initial production (IP) rates were revised down with the latest well data from Pennsylvania, leading to a ~500 MMcf/d reduction through the end of 2024 from last month's Macro forecast. This data series is lagged, but the most recent data is updated through 1H23.
Infrastructure – After several months of delay, New Fortress Energy (NFE) plans to produce first LNG from its Altamira project offshore Mexico later this month.
In the company’s 4Q24 update, NFE guided to the start of LNG production from the floating terminal in March, with the first commercial cargo expected to load in April ’24. The three-platform floating LNG facility was fully installed in October ’23, at which time NFE had expected LNG production to begin in November.
If the latest timeline holds, it would mean the 1.4 mtpa (~0.2 Bcf/d) Altamira project would progress from a final investment decision (FID) to a commercial operations date (COD) in just 37 months. The timeline would be one of the fastest deployments we’ve seen in the US LNG sector. Venture Global’s Calcasieu Pass also required 37 months to complete; Venture Global took FID in August ’19 and began receiving ~1.6 Bcf/d of feedgas at Calcasieu Pass in September ’22. But Calcasieu Pass was producing 8x the LNG volumes after the same time from FID to first LNG (Calcasieu Pass technically has not made COD, because the LNG is being exported on a commissioning basis).
Infrastructure –Waha hub prices in West Texas fell into negative territory this week as egress constraints put downward pressure on prices. Kinder Morgan’s (KMI) El Paso Natural Gas has been undergoing maintenance on its North Mainline since the beginning of March. The work is projected to continue through April, based on EPNG’s preliminary maintenance schedule.
Waha traded -$2.34/MMBtu behind the Henry Hub on March 18, the lowest price so far this month. Larger capacity reductions on EPNG are scheduled later in March through April, indicating more pressure is likely for Waha in the near term.
Storage – Traders expect the Energy Information Administration (EIA) to post a net injection of 1 Bcf into working gas for the week ending March 15. Inventories would increase to ~2,326 Bcf, in line with East Daley’s forecast in the monthly Macro Supply and Demand Forecast.
The range of estimates for this week’s EIA release is relatively tight, calling for anywhere from a small withdrawal of -10 Bcf to an injection of +12 Bcf, according to a survey by John Sodergreen’s The Desk. A net injection in mid-March is not unprecedented but still a relatively rare event. A net injection has happened this early on only two occasions in weekly EIA storage figures dating to 2010 – for the weeks ending March 19, 2010 and March 16, 2012.
Based on market estimates, the surplus to the 5-year average will balloon to 670 Bcf, the largest surplus in historical EIA storage data, while the surplus to last year will total 426 Bcf. To put that number in perspective, the Lower 48 will have nearly 2.0 Bcf/d more gas on hand over last year for every day of the storage injection season staring April 1.
Rigs - US rig counts declined by 3 rigs W-o-W to bring the count to 594 for the March 10 week. The Permian Basin lost 4 rigs, the Marcellus NE-PA declined by 1 rig, and the Bakken is down 2 rigs. The Anadarko, Eagle Ford and Powder River basins are each up 1 rig.
On the midstream side, Enterprise Products (EPD) lost 4 rigs on its Permian and Eagle Ford systems. ONEOK (OKE) is down 4 rigs on its Bakken and Anadarko systems. Targa Resources (TRGP) gained 2 rigs on its Permian systems. Energy Transfer (ET) is up 2 rigs with additions in the Anadarko, Eagle Ford and ArkLaTex.
East Daley’s weekly Midstream Activity Tracker monitors rig activity by basin and 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.