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Analysis: Permian Basin gas constraints on track to ease in 2019

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Analysis: Permian Basin gas constraints on track to ease in 2019

亮点

Proposed pipeline capacity of 14 Bcf/d

West Texas Waha Hub prices recover sharply

  • 作者
  • Eklavya Gupte
  • 编辑
  • Keiron Greenhalgh
  • 大宗商品
  • 天然气

Denver — Natural gas production in the Permian Basin has outpaced pipeline takeaway capacity, but with the rollout of new projects, this trend is expected to change next year.

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Multiple proposed pipelines are expected to come online in the next four years that could help alleviate Permian gas constraints. The Permian Basin has around 14 Bcf/d of proposed pipeline capacity scheduled to commence service between now and 2022.

Related story: Falling Permian well performance could pose risk to longer-term growth: Schlumberger

Related story: New gas-fired generation to boost Appalachia gas demand

News of these ventures, coupled with a rise in demand, is also beginning to support prices at the West Texas Waha gas hub.

The Gulf Coast Express (GCX) pipeline project, which will transport gas from West Texas to the Agua Dulce Hub, has a design capacity of 1.98 Bcf/d and is expected to be in service by October 2019.

The Permian Highway Pipeline, which will transport 2 Bcf/d of gas from the Permian to the Texas Gulf Coast, received a final investment decision in September. Gas for this infrastructure will be sourced from existing Kinder Morgan, EagleClaw and Apache systems, with additional interconnections to both intrastate and interstate pipelines in the Waha area.

The project will also enable volumes to reach the Katy and Waha hubs, the Coastal Bend and Kinder Morgan Tejas headers connected to key LNG export facilities at Freeport and Corpus Christi.

PRODUCTION

Analysts say this line will play a pivotal role in not only the regional production growth narrative, but also the subsequent growing demand centers it will ultimately feed.

Other projects include the 2 Bcf/d Pecos Trail Pipeline, which will transport Permian gas to the Agua Dulce Hub along with the 240-mile North Texas Expansion line.

Permian dry gas production is up a little more than 1 Bcf/d year on year in October at an average of 7.7 Bcf/d, according to S&P Global Platts Analytics.

Crude is still the primary target for Permian producers, but gas output is also surging.

Well completions in the Permian reached a six-month high in September, and the number of drilled but uncompleted (DUC) wells in the country's most active basin also surged, according to recent data from the US Energy Information Administration's Drilling Productivity Report.

"We maintain our view that takeaway constraints will start to ease materially in [the third quarter of] 2019 thanks to the completion of significant pipeline capacity," analysts at HSBC Research said in a recent research note. "Interestingly, there are signs that these constraints could be tempered earlier as a result of the collective efforts of midstream companies."

PRICE RECOVERY

This trend can also be seen in gas prices at the West Texas Waha Hub.

Cash basis Waha has surged in the past month after prices sank to an all-time low of Henry Hub minus $2.21/MMBtu on September 21, S&P Global Platts data show.

Prices have continued on their recovery, rising to 75 cents/MMBtu on Wednesday, providing some relief to producers after a summer when the surge in supply pressured prices.

Permian gas production has risen to 7.8 Bcf/d after dipping to 7.5 Bcf on October 10.

Analysts said the rise in prices may be the result of the end of intrastate pipeline maintenance creating additional eastbound capacity that may not have been there earlier in October.

-- Eklavya Gupte, eklavya.gupte@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com