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Valley Crossing maintenance could pressure Texas exports, prices

Highlights

Seven-day maintenance will halt deliveries to Sur de Texas

Prior, one-day maintenance showed no export, price impact

New York — Maintenance on Valley Crossing Pipeline will begin restricting all receipts and deliveries on the intrastate pipeline beginning later this week, potentially putting downward pressure on South Texas gas exports and prices.

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From January 16 to January 22, the planned maintenance on Valley Crossing will halt shipments along the Nueces Header and Brownsville portions of the pipeline, according to a recent critical notice posted by operator Enbridge.

On January 3, a similar maintenance event also halted transmissions on Valley Crossing, resulting in a steep decline in volumes delivered to Mexico from the Sur de Texas-Tuxpan cross-border pipeline.

During its single-day duration, exports on Sur de Texas fell to just 130 MMcf – a decline of nearly 400 MMcf/d and the lowest daily transmission volume on the pipeline since it entered service in September.

A nearly commensurate increase in exports on NET Mexico at the time of the maintenance helped to backfill for the drop on Sur de Texas, with no appreciable impact on South Texas gas exports or prices, S&P Global Platts data shows.

The longer, seven-day duration to the upcoming maintenance event, though, could test NET Mexico's capacity to backfill for the Sur de Texas decline. In that case, cash prices at Texas Eastern STX and locations as far north as Houston Ship Channel could come under downward pressure as stranded supply pushes it way back into the Texas market.

TEXAS EXPORTS

After entering service in February 2019, shippers on Valley Cross waited over seven months to deliver export volumes to Mexico on Sur de Texas amid construction delays and an extended contractual setback.

The Valley Crossing and Sur de Texas pipelines combined have enabled shippers in Texas to significantly boost exports to points south of the border. In the fourth quarter, Texas exports to Mexico averaged nearly 4.6 Bcf/d – about 600 MMcf/d or 15% higher compared to the year-ago period.

In January, outflows from Texas have averaged just over 4.4 Bcf/d, having come under downward pressure earlier this month when the extended holiday period kept Mexico's gas demand to a minimum.

OUTLOOK

After reaching a monthly average record-high at nearly 5.5 Bcf/d in October, US exports to Mexico trended downward toward the end of last year, due only in part to seasonal fluctuations in demand.

According to Platts Analytics, downstream constraints on the national pipeline grid have continued to pressure and displace NET Mexico pipeline exports.

Following startup of the Sur de Texas-Tuxpan pipeline, a significant number of end-users in the country's Northeast and beyond appear to have shifted their gas supply source away from NET Mexico in favor of Sur de Texas.

With limited access to additional end-users served from NET Mexico – and accessible segments of the national pipeline grid – import volumes on NET have remained suppressed since September, averaging about 300 MMcf/d below levels observed prior to startup of the competing Sur de Texas flow corridor.

A continuation of this trend will likely keep Mexico's gas import demand around 5.3 Bcf/d, at least in the near term, according to a recent forecast from Platts Analytics.

By March, though, the potential startup of downstream infrastructure in Mexico – most notably the remodified Cempoala compressor station – could provide access to new end-users, potentially boosting US exports to over 6 Bcf/d by later this year.