NGPL lifts Segment 25 force majeure, allowing higher Texas-to-Southeast flows

Kinder Morgan's Natural Gas Pipeline Co. of America pipeline lifted its force majeure on Segment 25 in its Texok Zone, the company said April 21, which should increase eastbound flows of Texas gas toward the Southeast and narrow East Texas spot gas prices' discounts to cash Henry Hub.

The force majeure on Segment 25 and its associated flow restrictions on Compressor Station 302 were lifted as of 8:17 am CT April 21, according to a critical notice NGPL published the same day.

After the announcement, Houston Ship Channel's cash basis spread to Henry Hub cash narrowed to 36.50 cents in April 21 trading for next-day flows, preliminary settlement data from S&P Global Commodity Insights shows, down from averaging 53.50 cents over trade days April 19-20.

Other East Texas locations, such as Katy Hub and NGPL, Texok, saw similar tightening of basis spreads at preliminary settlement. Katy Hub's discount narrowed to 36 cents from averaging 50 cents April 19-20 and NGPL, Texok's discount narrowed to 41 cents from averaging 61.50 cents.

Force majeure

The Segment 25 force majeure event was initially declared at 5:02 pm CT April 18, after NGPL pipeline operators discovered an electrical issue at Compressor Station 343 in Liberty, Texas. Consequently, NGPL reduced maximum eastbound operating capacity into Segment 25 from Segments 26 and 22, effective the Intraday 3 Cycle April 18. This capacity restriction translated into lowering eastbound flows through Compressor Station 302, which is a key nexus point in the pipeline's Texok Zone.

Pipeline nomination data shows that eastbound flows past NGPL's Station 302 dropped to average 850 MMcf/d April 18-21, down 280 MMcf/d from the seven days prior to the outage (April 11-17). With full flow capacity restored for gas day April 22, nominations through this point will likely rise sharply to or near to pre-outage levels over the next several days.

While pipeline nomination data shows that some Southeast Texas-to-Southeast flows were likely redirected to cross into Louisiana via Northeast Texas routes, total Southeast inflows have dropped substantially since the April 18 force majeure. Analytics data from S&P Global shows that total inflows have averaged 13.4 Bcf/d for April 18-21, around 600 MMcf/d lower than the month-to-date average of 14 Bcf/d.

Market impact

Beyond tightening East Texas basis spreads, the restoration of eastbound NGPL flows into the Southeast will likely have a slight dampening effect on that region's spot gas prices. At its April 21 preliminary settlement, Henry Hub cash fell 17 cents to $6.865/MMBtu.

Another effect of the four-day outage may be on South Central weekly gas storage numbers for the week in progress, which may reflect a higher net injection volume than otherwise. Daily net withdrawals from NGPL storage were halved during the force majeure, averaging 202 MMcf/d April 18-21, down from around 475 MMcf/d during the previous seven days.