Natural Gas Weekly: July 17, 2024
Flows – The planned start of Matterhorn Express Pipeline later this quarter will have big impacts on gas flows from the Permian Basin. East Daley expects the 2.5 Bcf/d pipeline will cause volumes to redirect from other pipeline systems once online, as well as encourage new supply later in 2024.
Daily interstate pipeline scrapes from the Permian Basin have averaged 6.0 Bcf/d so far in July ‘24, holding relatively flat compared to 1Q24. Meanwhile, Permian rig counts averaged 287 in June ‘24, down 10% from 315 rigs in January as upstream mergers have slowed drilling activity. However, EDA expects to see production ramp from the region once Matterhorn starts. This could mean that producers bring back rigs or start adding completions, reducing the inventory of drilled but uncompleted wells (DUCs).
In EDA’s Permian Supply and Demand Forecast, the start of Matterhorn causes some flows to redirect from other pipelines to Katy on the Texas Gulf Coast. We expect linefill from Matterhorn to start in 3Q24, and volumes to ramp to 2.5 Bcf/d by September. Early flows are primarily displaced from northbound Permian pipelines to the Midcontinent, such as the Northern Natural and Natural Gas Pipe Line of America (NGPL) systems, with some new production also taking up space. In our latest forecast, we model Permian dry gas production to increase 2.5 Bcf/d by 2026, meaning supply will grow into Matterhorn’s new egress before shippers face constraints once again.
See East Daley’s Permian Supply and Demand Forecast for more information on the Permian outlook. An interactive dashboard (see figure) is now available in Energy Data Studio.
Infrastructure – Whistler Pipeline and Cheniere Energy (LNG) have started service on the ADCC Pipeline in South Texas. The new 42-inch pipeline began commercial service on July 1 from the Agua Dulce hub to Cheniere’s Corpus Christi Liquefaction (CCL), according to developer Whitewater.
The 40-mile ADCC line is designed to transport up to 1.7 Bcf/d in support of the Phase III midscale expansion at Corpus Christi. Cheniere plans to bring the Phase III project online in phases starting in 2025. ADCC is owned 70% by Whistler Pipeline and 30% by a Cheniere subsidiary.
The new line will give Cheniere more flexibility to source gas at CCL. Prior to ADCC, the LNG facility had been served by only one pipe, the Corpus Christi Pipeline. ADCC also will help move Permian gas further downstream via Whistler and contribute to the development of Agua Dulce as a trading hub. However, we do not expect a big near-term shift in the regional market since Whistler Pipeline was already running full out of the Permian.
As an intrastate line, ADCC is not likely to be picked up by pipeline scrapes, making it difficult for traders to track activity. Pipeline data from IIR Energy shows deliveries to CCL (excluding ADCC) has averaged 1,930 MMcf/d to date in July (see figure).
Storage – Traders and analysts expect the Energy Information Administration (EIA) to report a net injection of 25 Bcf into working gas for the week ending July 12. John Sodergreen’s The Desk reports a fairly wide range of estimates for the week, spanning an injection from 15 to 38 Bcf. The uncertainty reflects strong demand over the week from hot summer weather across the Lower 48, coupled with market disruptions from Hurricane Beryl in Texas.
For the same week last year, the EIA reported a 43 Bcf storage injection. Inventories would rise to 3,224 Bcf based on market estimates, the earliest in history that summer inventories would cross the 3,200 Bcf threshold. The surplus to the 5-year average would fall by 24 Bcf to 480 Bcf, while the surplus to last year would drop by 18 Bcf to 265 Bcf.
As forecasts for warmer weather have dissipated across much of the Lower 48 this week, the prompt month price for gas has steadily fallen, trading at $2.02/MMBtu Wednesday afternoon. Without significant hot weather taking hold, August prices will continue to remain weak, likely through expiration next week. Henry Hub spot prices traded below $2.15 Wednesday.
Rigs – US rigs are down 1 W-o-W to bring the total count to 554. The Permian is down 2 rigs while the Marcellus+Utica, DJ and Bakken basins each lost 1 rig for the July 6 week. The Anadarko and Eagle Ford each added 2 rigs, and the Powder River Basin is up 1 rig.
On the midstream side, Energy Transfer (ET) gained 2 rigs total on its Anadarko and Eagle Ford systems. Kinetik (KNTK) is down 1 rig on its Raptor system in the Delaware Basin.
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.