NGPL force majeure limits eastbound Texok Zone natural gas flows

The Natural Gas Pipeline Company of America declared a force majeure event on Segment 25 the evening of April 18, which will limit eastbound flows of natural gas in its Texok Zone for the foreseeable future, the company said.

With less capacity available for gas to flow out of East Texas toward Gulf Coast demand markets, basis spreads for regional spot gas pricing locations slid further into the red in April 19 trading for next-day flows.

NGPL, Texok Zone plunged nearly 50 cents to $6.71/MMBtu at its April 19 preliminary settlement, expanding its discount to cash Henry Hub to 67.50 cents from 35 cents the previous day.

Cash Houston Ship Channel saw its discount to cash Henry Hub nearly quadruple in April 19 trading, widening to 58.50 cents from 15.50 cents April 18, preliminary settlement data from S&P Global Commodity Insights showed. Katy Hub observed even deeper discounting, with its basis widening to 52.50 cents from two cents in the prior day's settlement.

Lower Southeast Texas-to-Southeast flows could be providing some support to Southeast spot natural gas prices, with pipeline nomination data showing that the Southeast's inflows from Southeast Texas fell 207 MMcf, or 9%, to 2.16 Bcf April 19.

Although spot natural gas prices across the eastern United States tumbled substantially in April 19 trading, cash Henry Hub fell just 17 cents to $7.485/MMBtu at its April 19 preliminary settlement, with many Southeast spot gas prices similarly remaining above $7/MMBtu.

The US Southeast has become increasingly reliant on natural gas supply from Southeast Texas this year, with data from S&P Global showing that Southeast Texas-to-Southeast year-to-date flows were 58% higher than in the same period in 2021. In addition to near-record high LNG feedgas demand, nuclear power generator outages in the Southeastern states have boosted non-peaking demand for gas-fired generation 15% year-over-year, which has been compounded by a 14% drop in offshore gas production volumes in Louisiana.

Force majeure

At 6:08pm ET on April 18, NGPL published a critical notice declaring a force majeure event related to an electrical outage at Compressor Station 343 in Liberty County, Texas. The unplanned outage was expected to limit flows into Segment 25 from Segment 26 and Segment 22 in the pipeline system's Texok Zone.

Eastbound flows past Compressor Station 302, which is the nexus of NGPL's South Texas, Louisiana, and Texok lines, is the primary scheduling constraint. Effective Intraday 3 Cycle of gas day April 18, no less than 71% of contract volumes can move east through Compressor Station 302, according to the critical notice.

Pipeline nomination data showed that eastbound flows past Compressor Station 302 dropped around 300 MMcf to 852 MMCf April 18, down from 1.15 Bcf/d on April 17 and from a seven-day average of 1.13 Bcf/d. Flows remained at 852 MMcf/d April 19.

Outlook

As of April 18, NGPL expected the restrictions on eastbound flows to continue through at least April 22, which could keep East Texas spot gas price spreads relatively wider for the duration of the maintenance. However, rerouting some natural gas volumes to Northeast Texas or to Mexico could provide some relief for East Texas spreads.

Already, pipeline exports of Texas gas to Northeast Mexico were up around 300 MMcf, or 10%, April 19, as Mexican gas demand recovered after a holiday-related dip. The bulk of the additional volumes into Northeast Mexico flowed along Sur de Texas-Tuxpan, pipeline nomination data showed.