By - Jim Vess

New takeaway pipeline capacity bolstering natural gas prices in Texas’ Permian Basin

Energize Weekly, September 11, 2019

Natural gas prices in the Permian Basin are being bolstered as new takeaway pipeline capacity is opening in the western Texas fields. The natural gas price at the Waha Hub in western Texas reached $1.55 per million British thermal units (MMBtu) on Aug. 15, the highest price in nearly six months.

“This price increase coincides with the 2 billion cubic feet per day (Bcf/d) Gulf Coast Express Pipeline (GCX) preparing to enter service,” the federal Energy Information Administration (EIA) said. “GCX will provide much-needed additional natural gas takeaway pipeline capacity from the Permian region of western Texas and southeastern New Mexico.”

The lack of pipeline takeaway capacity has kept prices low and sometimes even negative in the basin. For the first eight months of 2019 through Aug. 19, the Waha spot price averaged 65 cents per MMBtu

The gap between the Waha spot and the Henry Hub spot price, the national standard for natural gas, has been significant. Between March and June 2019, the gap averaged between $2 a MMBtu and $3 a MMBtu.

The gap, however, has begun to close with the Waha spot price just 59 cents MMBtu lower than the Henry Hub price on Sept. 5. That was the lowest differential since January.

Natural gas deliveries into the GCX began Aug. 8, and the improved prices for Permian natural gas followed. S&P Global Platts reported that deliveries at El Paso Natural Gas pipeline’s interconnection with GCX reached nearly 0.26 Bcf/d on Aug. 14.

The GCX will not be fully operational until Oct. 1 when it will be able to send 2 Bcf/d east to the Agua Dulce receipt point near the Texas Gulf Coast.

The Permian has primarily been an oil play, but is producing large volumes of natural gas as a byproduct. Crude oil pipeline capacity expanded in 2019, but GCX is the first addition to natural gas takeaway capacity. Operators may vent or flare the gas under regulation from the Texas Railroad Commission.

Several additional natural gas pipelines are planned from the Permian to the Gulf Coast including:

  • The Permian Highway Pipeline with 2.1. Bcf/d of capacity
  • The Whistler Pipeline (2 Bcf/d)
  • The Permian 2 Katy Pipeline (1.7 to 2.3 Bcf/d)
  • The Pecos Trail Pipeline (1.9 Bcf/d)
  • The Permian Global Access Pipeline (2 Bcf/d)
  • The Blue Bonnet Market Express Pipeline (2 Bcf/d)

Only the Permian Highway Pipeline and the Whistler Pipeline have reached a final investment decision. The Permian Highway is slated to enter service in 2020 and Whistler is to open in 2021.

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