Denver — Delayed startup of the Sur de Texas-Tuxpan pipeline, which could continue indefinitely amid possible arbitration proceedings by Mexico's CFE, already appears to be impacting South Texas gas supply.
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Over the past several months, supply likely contracted by the state-owned power generator to feed the delayed pipeline has overwhelmed the region, depressing prices and rapidly filling regional storage inventories.
In June, basis prices at key hubs in south and east Texas are down sharply compared to last year.
At Texas Eastern STX, cash basis has averaged minus-12 cents/MMBtu this month, or about 14 cents lower compared to last June. At the NGPL STX hub, basis prices averaging minus-9 cents/MMBtu are down from an average 1 cent premium to the benchmark last June.
Even further north, at key East Texas supply hubs like Houston Ship Channel and Katy, basis prices are notably lower this June compared with last, down about 12 cents and 9 cents, respectively, S&P Global Platts data shows.
Gas storage inventories in the region have also filled rapidly this summer.
Since the start of March, Texas storage injections have average over 1 Bcf/d. The rate of injection has outpaced last year's March-to-date average by 170 MMcf/d, or about 20%. Compared to the five-year average injection, storage builds are up 210 MMcf/d, or about 25%.
At 363 Bcf, current Texas storage inventories are now above five-year average levels for late June, according to implied storage data compiled by S&P Global Platts Analytics.
Earlier this week, the CFE sent a request for arbitration over capacity payments made on the 2.6 Bcf/d Sur de Texas-Tuxpan pipeline to Marina del Golfo, the joint-venture company owned by the pipeline's developers TC Energy and IEnova.
At issue was a declaration of force majeure made by Marina del Golfo during the project's construction, which afforded the JV company the legal right to charge CFE for capacity on the pipeline before it entered service.
In a recent interview, the former regulatory head of Mexico's Cenagas, Edgar de Leon, said that the startup of the Sur de Texas pipeline would now depend entirely on the will of CFE.
CFE has recently sent similar requests for arbitration to other pipeline developers in Mexico for capacity payments made on delayed or suspended projects.
During a press conference in February, Mexican President Andres Manuel Lopez Obrador complained that capacity payments for several unfinished pipelines could "ruin" the CFE, costing it $840 million this year alone .
Electronic bulletin board data posted by TC Energia Thursday showed receipts on the pipeline have averaged about 130 MMcf/d over the past week, although no deliveries have yet been made from the pipe.
Injections to the pipeline peaked at nearly 280 MMcf/d Sunday, but have since trailed off. Before deliveries from the pipeline begin, initial receipts could be used for pressure testing or other commissioning activity.
The Sur de Texas-Tuxpan pipeline was originally scheduled to enter service in October 2018. The project's startup was further delayed in February when developer TC Energy said that it faced weather challenges slowing completion of underwater portions of the pipeline.
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