El Paso maintenance to limit Permian westbound gas transmission through December

An updated maintenance schedule recently published by El Paso Natural Gas has extended ongoing pipeline repair work on its Line 2000 through the end of December, keeping downward pressure on Permian Basin supply flowing westbound into Southwestern gas markets.

In a critical notice published Nov. 16, El Paso warned shippers that continued reduced operating pressure on its Line 2000 will keep the system out of service from the Black River compressor station to the California border with no estimated timeframe for returning the line to full service.

The critical notice updates El Paso's original force majeure declaration posted Aug. 15 when the pipeline failure on Line 2000 first occurred near Coolidge, Arizona. El Paso advised that the incident remains under US National Transportation Safety Board investigation and that updates would be provided as they become available.

On Nov. 16, forward prices at the SoCal Gas city-gate halted their downward trajectory on the news that ongoing maintenance on El Paso's westbound mainline would continue through December.

At market settlement, city-gate prices for balance-November were up about 17 cents on the day to $6.43/MMBtu. Forwards prices for December and January made slightly larger gains, rising to $7.47 and $7.38/MMBtu, respectively, S&P Global Platts' most recently published M2MS data shows.

Westbound flows

Following the announcement of El Paso's Line 2000 maintenance in August, westbound flows from the Permian immediately dropped about 500 to 600 MMcf/d in response to the new capacity restriction.

In the three months since, westbound flows have averaged just 2.9 Bcf/d, down from pre-maintenance levels closer to 3.4 Bcf/d, data from S&P Global Platts Analytics shows.

In the US Southwest, the prospect of reduced supply from the Permian Basin initially rattled the forwards markets – particularly in Southern California where West Texas gas is a critical source of supply.

From mid-August through late September peak-winter gas prices at the SoCal city-gate nearly doubled, reaching $13 to $14/MMBtu. Amid mounting concern over winter gas supply in the region, the California Public Utilities Commission on Oct. 1 announced that it would consider two separate proposals to boost supply for gas and electric customers in the Los Angeles metro area this winter.

A steep selloff in the SoCal gas forward market followed the announcement.

A commission vote in November ultimately determined that it would allow Southern California Gas Company to expand the volume of working gas available at the controversial Aliso Canyon Natural Gas Storage Facility by some 21% to 41.2 Bcf. Aliso Canyon's maximum capacity was previously limited to 34 Bcf following a gas leak in 2015.

Thanks to CPUC's shoring up of Southern California's gas supply, the biggest upside risk for SoCal city-gate prices this winter will likely be the weather. According to the National Weather Service's most recent seasonal outlook, Southern California faces a 33% to 40% chance for above-average temperatures from December to February, likely reducing the risk for extreme cold weather in the region this winter.