It is a place where gas prices fluctuate from marginal to "can't give it away" and pipeline relief may be coming, or maybe not.
The Waha hub was the talk of the recent LDC Gas Forums Rockies & West conference held Aug. 5-7 in Los Angeles. The conference, in its 15th year, brings together gas producers, marketers and local distributors. Waha, located in northwest Texas in the Permian Basin, has been swamped by gas produced as a byproduct of roaring oil production in the region. As a result, Rockies shippers looking to move gas inside Texas or to the Gulf Coast, and oil producers desperate to unload gas to meet flaring regulations, have clogged the pipeline hub and sent prices plunging as low as negative-$9/MMBtu.
Relief may be coming from in the form of new pipelines out of the region, but when the first of those arrives late in 2019 it will be full. Producers have flared as much as 1.2 Bcf/d in the Permian, which even in energy-friendly Texas could raise the ire of regulators.
"Record production in the Permian with no place for it to go," Clint Stockman, vice president of West region gathering and processing at upstream giant ConocoPhillips, said. "You see Waha daily prices plummet in mid-April. We see gas daily posting down a couple of dollars and you can see trades as low as negative-$9/MMBtu on the day. It's just incredible."
The bottleneck at Waha is expected to ease once Kinder Morgan's Gulf Coast Express system goes into operation in October. The Houston-based midstream giant is also leading a consortium that plans to have the Permian Highway pipeline online in 2020, and a group that includes MPLX LP and Targa Resources Corp. plans to have the Whistler pipeline in service by 2021.
The Permian problem is simple, according to Jared Barton, vice president of marketing and origination at BP PLC's U.S. upstream company. The solution is more complex.
"There's a lot of gas that we need to get rid of," Barton said. "Infrastructure is being built — primarily to deliver gas from the Permian Basin to the Texas area, further southward, and for eventual liquefaction for exports. Once this infrastructure is built, however, it's not necessarily the fix because the [U.S. Energy Information Administration] has estimated approximately 4,000 drilled, uncompleted wells in the Permian Basin. We clearly need incremental demand into Mexico — frankly anywhere we can get it — into Mexico, into LNG for exports throughout the world, in order that our length in the Permian Basin mitigates."
Producers have received some measure of balance at Waha, but "we've done that through a lot of flaring," said Tony Scott, managing director of BTU Analytics LLC. "We're burning a lot of — lot of — gas waiting for these pipelines, as well as we're shutting in oil volumes."