Natural Gas Weekly: March 13, 2024
Flows – Freeport LNG feedgas volumes have averaged just 677 MMcf/d since March 4, suggesting a second liquefaction train could be offline at the Texas export terminal.
Freeport LNG shut down Train 3 in mid-January following a winter storm that damaged an electrical motor, dropping deliveries by ~0.5 Bcf/d from pipelines connecting to the terminal on Quintana Island, TX. The company told Reuters in late January the outage would last at least a month, but service remains down six weeks later at the terminal.
The lower demand from Freeport LNG is one factor weighing on natural gas prices. Traders pushed the front-month April Henry Hub contract down 2.9% to a $1.66/MMBtu close on Wednesday (March 13).
Freeport LNG receives ~2.1 Bcf/d of natural gas when all three liquefaction trains are operating normally. The lower pipeline deliveries since March 4 put recent utilization at ~30%. It is unclear whether the lower flows in March are connected to the repairs at Train 3 or will be extended, as the company has not updated on the recent declines in feedgas.
Infrastructure – DT Midstream (DTM) has started a new gathering pipeline ahead of schedule in the Ohio-Utica shale, the first major midstream investment serving the emerging play in the western Appalachian Basin.
In the company’s 4Q23 earnings update, DTM said it began service early on the trunkline of the new gathering system in eastern Ohio. DTM unveiled the project in 2Q23, at the time guiding to a start-up in the first half of 2024. The new system will be able to gather up to 200 MMcf/d ofl gas.
The DTM project is backed by long-term commitments from a large-cap producer, executives said previously. DTM did not disclose the counterparty, but EOG Resources (EOG) is the likely candidate. EOG in 2022 announced its entry in the “Utica Combo,†where the producer acquired leases for 395,000 net acres in eastern Ohio for ~$500MM.
The emerging Ohio-Utica shale is an exciting opportunity for the midstream sector. Based on disclosures from EOG, development of the play could create a need for new investments serving crude oil, NGLs and natural gas.
East Daley tracks natural gas infrastructure that could handle future growth from the Ohio-Utica in the Northeast Supply and Demand Forecast, including processing facilities and takeaway pipelines. Our outlook shows some seasonal capacity is available to move gas west out of the Appalachian Basin, creating some potential for upside on certain systems.
Storage – Traders expect the Energy Information Administration (EIA) to post a small withdrawal of 1 Bcf from working gas for the week ending March 8. Inventories would fall to ~2,333 Bcf for the week, 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 very wide, ranging from a withdrawal of 35 Bcf to an injection of 29 Bcf, according to a survey by John Sodergreen’s The Desk.
If capacity holders were to post even a small net injection for the week, it would be the earliest seasonal injection in historical EIA storage data. The earliest start to injections occurred the week of March 10, 2012, according to EIA data.
The storage surplus to the 5-year average would balloon to 637 Bcf based on market estimates, also a record high. The surplus over last year will also remain stout at 361 Bcf.
Rigs - US rigs decreased by 7 W-o-W to bring the total count to 587. The Permian is down 4 rigs while the ArkLaTex and Bakken are down 2 rigs each. The Eagle Ford gained 2 rigs, and the Uinta and Anadarko basins are each up 1 rig.
On the midstream side, Targa Resources (TRGP) lost 3 rigs on its Permian and Anadarko systems. Energy Transfer (ET) is down 3 rigs with losses on the Eagle Ford, Permian and ArkLaTex systems. Kinder Morgan (KMI) is up 2 rigs with additions on their Bakken and ArkLaTex systems. Western Midstream (WES) is up 2 rigs in the Permian.
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.