Analysis: Haynesville glimpses new Gulf Coast market access in 2021, 2023

New York — Producers operating in the Haynesville Shale should see improved access to US Gulf Coast markets following the recent announcement of a final investment decision on the CJ Express project.

Last week, Midcoast Energy said it would proceed with the addition of up to 150 miles of 36-inch diameter greenfield pipeline at multiple locations along the operator's existing East Texas system.

The expansion will increase gathering capacity in the Shelby Trough area of the Haynesville and boost transmission capacity on Midcoast's Clarity Pipeline system by 1 Bcf/d – improving deliverability to export and industrial markets along the Texas and Louisiana Gulf Coast.

In conjunction with its FID announcement, MidCoast said it had reached definitive, long-term anchor shipper agreements in support of the proposed expansion. The completed project is expected to enter service by early 2021.

A separate announcement from Enable Midstream Partners Monday offered more promising news for Haynesville producers as the company applied for regulatory approval to build its own 1.65 Bcf/d interstate pipeline from the Louisiana shale basin to the Golden Pass LNG terminal.

Enable's Gulf Run Pipeline is seeking authorization from the Federal Energy Regulatory Commission to begin construction by early 2021 with a proposed January 1, 2023 in-service date.

IMPACT

Incremental capacity from the Haynesville to US Gulf Coast markets will help relieve area gas producers battered by discounted prices at Carthage, the basin's nearest delivery point.

Year to date, cash prices at the East Texas hub have averaged an 11-cent/MMBtu discount to benchmark Henry Hub gas, or $1.82/MMBtu, S&P Global Platts data shows.

The basis discount at Carthage, though, is likely to widen during the coming spring and autumn shoulder seasons as utilization rates on southbound transmission corridors to Henry Hub and Houston Ship Channel rise.

Last October, Haynesville production flowing to Perryville and onward to Henry Hub faced pushback from competing Appalachian gas on ANR Pipeline, Columbia Gulf Transmission, Tennessee Gas Pipeline's 800 leg, Texas Eastern Transmission, Texas Gas Transmission and Trunkline Gas.

Collectively, the pipelines making up the Perryville-to-Henry Hub corridor reached nearly 90% utilization, driving steep basis discounts of more than 60 cents/MMBtu at Carthage.

While Haynesville gas moving southbound to the Gulf Coast can also flow via a separate, Carthage-to-Houston Ship Channel corridor, that route too has become increasingly constrained, according to Platts Analytics.

Forward markets have thus far reacted little to the impact that Carthage could see from recent growth in seasonal utilization rates on the Haynesville-to-Henry Hub and Haynesville-to-Houston Ship Channel corridors. On Tuesday, Carthage forward basis for April and May settled at minus-9 cents/MMBtu, while the September and October contracts were only slightly weaker at minus-10 cents/MMBtu, Platts M2MS data shows.