Infrastructure – The Permian Basin is entering a new growth phase thanks to expansions of pipeline and processing infrastructure. In the Permian Basin Supply & Demand Report, East Daley expects natural gas production to increase by more than 1 Bcf/d by YE24 thanks to new midstream investments.
Our near-term outlook is supported by the recent start-up of the Matterhorn Express Pipeline, which added 2.5 Bcf/d of takeaway from the Waha hub to Katy. The Blackcomb Pipeline will contribute another 2.5 Bcf/d of egress to South Texas by 2026.
On the processing side, we are tracking projects totaling ~3.7 Bcf/d of capacity due to start from 2024-26 (2.4 Bcf/d in the Delaware and 1.3 Bcf/d in the Midland). The usual midstream suspects are sponsoring many of these projects, including Energy Transfer (ET), Enterprise Products (EPD), Western Midstream (WES) and Targa Resources (TRGP). Some producers are also self-funding expansions. EOG Resources (EOG), for example, is building the 300 MMcf/d Janus plant to treat its gas in the Delaware. The Janus plant is scheduled to start in 1H25, executives said on EOG’s 3Q24 earnings call.
In the Permian Basin Supply & Demand Report, East Daley projects supply to grow 1.7 Bcf/d next year, increasing from an average of 17.2 Bcf/d in 2024 to 18.9 Bcf/d in ’25. Growing production plus infrastructure enhancements increase average utilization at processing plants from 82% in 2024 to 88% by 2026.
Infrastructure – WhiteWater Midstream has started building the Blackfin Pipeline in southeastern Texas. The company filed to begin construction on October 1 on the new 48-inch line, according to a status update by the Texas Railroad Commission (TRC).
East Daley follows Blackfin Pipeline in the Houston Ship Channel Supply & Demand Report. Starting west of Katy, Blackfin Pipeline would travel for 160 miles north of the Houston metro area to Jasper County, TX, north of Beaumont (see map). The construction work will take place in Austin, Waller, Montgomery, Liberty, Hardin and Jasper counties. Blackfin will ultimately connect to Venture Global’s CP Express Pipeline to supply the CP2 LNG project in Cameron Parish, LA.
As more gas moves from the Permian to the Katy hub on Matterhorn Express, Blackfin will be a key piece of infrastructure to avoid oversupply. Blackfin could take Eagle Ford gas, but given it will start where Matterhorn terminates, East Daley suspects Blackfin will primarily serve as additional egress to debottleneck the Katy area. See the Houston Ship Channel Supply & Demand Report for more information.
Flows – US pipeline samples generally rose for the December 1 week, helped by the arrival of winter weather in many regions. The Thanksgiving holiday saw widespread cold temperatures with highs struggling to climb above freezing in many regions, particularly in the northern Plains and Midwest. Total US samples rose 0.4% W-o-W to 69.06 Bcf/d.
Bakken samples average 2.3 Bcf/d, decreasing 4% W-o-W, likely owing to freeze-off events from the frigid temperatures. Declines were posted on three interstate pipelines in the basin (Northern Border, Alliance, and WBI).
Permian Basin samples increased W-o-W by 3% to 6.1 Bcf/d. On November 20, Permian Highway Pipeline restored service on 489 MMcf/d, returning PHP to full capacity of 2.65 Bcf/d. Matterhorn volumes continue to hold around 1.3 Bcf/d to Katy.
ArkLaTex Basin samples decreased 1.2%, settling at 10.2 Bcf/d. This lines up with our latest ArkLaTex production forecast in the Southeast Gulf Supply & Demand Report showing a slower production ramp.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a 45 Bcf storage withdrawal for the week ending November 29, according to a survey by The Desk. A 45 Bcf withdrawal would be 2 Bcf less than the 5-year average and would increase the surplus to 269 Bcf over the 5-year average.
The market is paying closer attention to the following EIA survey, with the season’s first triple-digit withdrawal on tap for the week ending December 6. That report (to be released on Thursday, December 12) could reveal a 165 Bcf withdrawal, which would be the largest ever for the first week of December. The current record is a 164 Bcf withdrawal for the week ending December 10, 2010, so the market is in an unusual spot. A 165 Bcf draw would reduce the surplus by 94 Bcf to 175 Bcf over the 5-year average, which is where the storage surplus stood in early October before running off five consecutive weekly gains.
Gas prices have been volatile as the turn to colder weather came into focus. The Nymex prompt contract for January ‘25 rallied nearly $0.50/MMBtu (~17%) over the November 18 week on the prospect of below-normal temperatures, but has since given back nearly all of those gains through Tuesday (December 3). As the market focuses on the storage report this week, a withdrawal greater than the market consensus of 45 Bcf could ignite another rally ahead of the EIA report to be released December 12.
Rigs – The US rig count increased by 1 for the November 23 week, standing at 564. Basins losing rigs include the Permian (-3) and the Anadarko (-1). The ArkLaTex (+2), Eagle Ford (+2) and Marcellus + Utica (+1) gained rigs on the week.
On the midstream side, Energy Transfer (ET) is down 2 rigs net with losses on its Permian, Powder River and Bakken systems. EnLink Midstream (ENLC) lost 2 rigs total on its 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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