Texas gas markets largely unresponsive as activity on Whistler Pipeline ramps up

Natural gas markets in West and South Texas are showing a muted response thus far to an acceleration in commercial activity this week on the 2 Bcf/d Whistler Pipeline, a new west-to-east transmission corridor for Permian Basin production.

On Aug. 1, the 450-mile, 42-inch diameter intrastate pipeline from the Permian's Waha Header to Agua Dulce, Texas began ramping up with the addition of new delivery-reporting meters at several interconnecting interstate pipelines including Natural Gas Pipeline Co. of America, Tennessee Gas Pipeline and Transcontinental Gas Pipe Line.

Over the past five days, total delivered volumes to the three interstate pipes have climbed steadily to over 300 MMcf/d, according to data compiled by S&P Global Platts Analytics.

The addition of the new reporting meters on Aug. 1 likely signals a boost in flows on the mainline pipe, which isn't required to publicly report volumes flowing exclusively on its intrastate line.

West Texas

At the West Texas Waha hub, cash basis has shown no appreciable impact from the pipeline's startup this week. Aug. 1 to date, the cash market at Waha has traded at an average 25 cent/MMBtu discount to Henry Hub, roughly flat to its average discount of 24 cents in July, S&P Global Platts data shows.

For West Texas producers, the additional eastbound flow corridor adds new transmission capacity for a market that has remained largely unconstrained after the startup of Kinder Morgan's 2.1 Bcf/d Permian Highway Pipeline in January 2021 and its 2 Bcf/d Gulf Coast Express Pipeline in September 2019.

According to Platts Analytics, the capacity added by Whistler Pipeline lengthens producers' runway to grow output unconstrained until early 2024, when production growth is expected to again begin weighing on Waha's cash basis. In 2019 and 2020, severe price dislocations at the hub became commonplace, with prices often dipping into negative territory as a result of prior constraints on production growth.

South Texas

In South Texas, downstream hubs near the terminus of the Whistler Pipeline have also shown little impact from the project's startup earlier this week. Data for gas deliveries at Agua Dulce are not publicly reported, but the recent strengthening in basis prices there implies limited impact thus far.

In August, cash basis at Agua Dulce has actually gained about 3 cents/MMBtu, compared to prices in the final two weeks of July. At Texas Eastern South Texas, cash basis is up about a penny over the same period. A recent surge in Texas gas exports to Mexico could be at least partly responsible for the price gains, which have accrued despite the arrival of any additional supply from Whistler.

Whistler startup

The addition of the new reporting meters on Aug. 1 was promptly followed by a press release from the pipeline's owner consortium – WhiteWater Midstream, MPLX and a joint venture of Stonepeak Infrastructure Partners and West Texas Gas. The Aug. 2 release confirms an official startup of operations on the pipeline as of July 1.

The new Permian pipeline brings the total for recently added eastbound capacity to just over 6 Bcf/d since September 2019, giving West Texas producers abundant access to premium Gulf Coast industrial and export markets, including LNG. According to Platts Analytics, the pipeline could be among the last long-haul Permian transportation projects to enter service as gas infrastructure projects face increasing scrutiny from environmental groups, regulators and investors alike.