Flows – Kinder Morgan (KMI) will move forward with a long-awaited expansion of Gulf Coast Express Pipeline (GCX), adding more eastbound takeaway to meet gas production growth from the Permian Basin.
KMI announced the decision as part of its 3Q24 earnings. The GCX partners (KMI, ArcLight Capital Partners, and Phillips 66 (PSX)) reached a final investment decision (FID) on August 30 after obtaining binding long-term agreements, KMI said. The estimated $455MM project will build new compressors on the 500-mile pipe, lifting capacity by 570 MMcf/d from Waha to the Agua Dulce hub in South Texas. Start-up is targeted for mid-2026.
Among Permian gas pipelines to South Texas, GCX was the last to have a potential expansion still on the table. Competitors Whistler and Permian Highway Pipeline have all added compression in recent years to reach their maximum designs. The new project will take GCX’s total capacity to 2.57 Bcf/d.
Permian natural gas production is growing rapidly. 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. The new eastbound pipeline capacity is likely to fill quickly from new production growth and some rerouted northbound volumes (see figure).
The GCX expansion adds to a wave of recent projects that will expand Permian takeaway to the Texas Gulf Coast. The 2.5 Bcf/d Matterhorn Express Pipeline began delivering gas on October 1 to Katy. A group led by WhiteWater Midstream also has taken FID on a new project, the 2.5 Bcf/d Blackcomb Pipeline.
Permian operators will welcome the latest announcement. Matterhorn has filled rapidly, and while helping at the margin, Permian gas continues to frequently trade at negative prices due to other pipeline maintenance. The factors all point to a need for more expansions to accommodate Permian growth.
Infrastructure – East Daley is currently tracking multiple data center projects across the West Coast. While renewables may be used to generate some of the power associated with these projects, natural gas will likely shoulder an important role in providing the uninterrupted power necessary for data centers.
Projects across California, Idaho, Nevada, Oregon and Washington are expected to need power equivalent to 1.5 Bcf/d of natural gas. Meanwhile, Arizona alone has 13 prospective projects combining for over 2.1 Bcf/d of energy requirements.
With pipeline flows to the West Coast regularly constrained by a lack of capacity through the Rocky Mountains, operators are looking to western basins to answer the call for increasing demand. Williams (WMB) recently completed a project on MountainWest Pipeline designed to expand gas egress from the Uinta Basin in Utah. WMB has already closed a binding open season for a second expansion, and recently opened a third open season for the Fidlar Expansion to add westbound capacity (see map). Kinder Morgan (KMI) also announced in its 2Q24 earnings that it had executed definitive agreements to construct the Altamont Green River Pipeline, which will also expand egress from the Uinta. See East Daley’s West Coast Supply & Demand Report to learn more.
Flows – US pipeline samples declined 2.6% for the November 10 week, led lower by offshore shut-ins ahead of Tropical Storm Rafeal. The storm entered the western Gulf of Mexico after striking Cuba as a Category 3 hurricane last Wednesday (November 6), then weakened in the Gulf over the weekend.
In the aftermath of Rafael, over 26% of Gulf of Mexico oil production and 13% of natural gas output remained shut down Monday (November 11), according to the Bureau of Safety and Environmental Enforcement. Shut-in production losses from Rafael totaled 243 MMcf/d of natural gas. The agency said 6.2% of the Gulf’s production platforms and 16.7% of offshore rigs were still evacuated Monday.
Samples were also sharply lower W-o-W in the Northeast, down 4.0% (~1.3 Bcf/d). Unseasonably warm weather has limited early heating demand and pressured spot prices in November, potentially prompting some curtailments in the Marcellus + Utica.
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a net 42 Bcf storage injection for the week ending November 8, according to a survey by The Desk. A 42 Bcf injection would increase the surplus to the 5-year average by 13 Bcf to 228 Bcf, and would mark the third consecutive week that the surplus has grown. The surplus to last year would increase by just 1 Bcf to 158 Bcf.
The chart shows a revised near-term storage forecast where inventories reach 4 Tcf in mid-November, followed by two weeks of relatively small injections to close out the month. The new forecast reflects widespread above-normal temperatures across the eastern US that have delayed the normal start of the heating season. Gas-weighted heating degree days (GWHDDs) in November so far are the lowest since 2016. Based on the latest forecasts, storage is likely to end the month 310 Bcf above the 5-year average, returning to oversupply conditions.
Strong gas production has netted a storage surplus to the 5-year average for a record 95 weeks, dating to the week ending January 13, 2023. East Daley’s Macro Supply & Demand Forecast predicts the surplus will turn to a deficit in May ‘25. Growing LNG and power demand will rebalance the market and push storage inventories into deficit territory, which could last until the end of Winter ‘25-26.
Rigs – US rigs decreased by 5 W-o-W to bring the total count to 556 for the November 2 week. Basins losing rigs include the Anadarko (-4), Bakken (-1), Eagle Ford (-1), Marcellus-NE PA (-1) and Permian (-1). The Marcellus+Utica (+2), ArkLaTex (+1) and Uinta (+1) basins added rigs on the week.
On the midstream side, MPLX (MPLX) lost 3 rigs total on its Bakken and Uinta G&P systems. Kinder Morgan (KMI) gained 3 rigs on its ArkLaTex, Bakken and Uinta 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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