Executive Summary:
Infrastructure: Boardwalk Pipelines has launched an open season for the Texas Gateway project to move more gas from Texas to the Gillis hub in Louisiana.
Rigs: The US gained 1 rig for the week ending Nov. 1, bringing the total rig count to 519.
Flows: US natural gas volumes in pipeline samples increased 0.8%, averaging 69.2 Bcf/d for the week ending Nov. 9.
Storage: Traders expect the EIA to report a 34 Bcf injection for the week ending Nov. 6.
Infrastructure:
Boardwalk Pipelines has launched a binding open season for the Texas Gateway project on Gulf South Pipeline. The project aims to move more natural gas from Texas hubs to meet growing LNG and industrial demand in Louisiana.
Boardwalk proposes to build 155 miles of greenfield pipeline and upgrade existing facilities to provide at least 1.45 Bcf/d of capacity from Katy and Carthage to the Gillis hub in southwestern Louisiana. The company expects the project to enter service in November 2029.
Gulf South has executed a precedent agreement with a foundation shipper for 1.45 Bcf/d, enough to proceed with the project, according to the announcement. The open season will gauge additional interest to potentially upsize Texas Gateway.
Boardwalk joins a crowded field seeking to boost gas supply to Gillis. Kinder Morgan (KMI) is developing Trident Intrastate and the Texas Access Expansion on its Louisiana Pipeline, WhiteWater and Venture Global (VG) are partnering on Blackfin Pipeline and CP Express, and ARM Energy Holdings recently announced a final investment decision (FID) on Mustang Express Pipeline. However, Texas Gateway stands out from other recent FIDs in its choice of route. The new greenfield line would run directly between Carthage and Gillis, opening up egress from the rapidly developing Western Haynesville and the egress-constrained Shelby Trough.
Currently, East Daley Analytics estimates there will be 23.3 Bcf/d of existing and FID’d capacity into the Gillis hub and the surrounding LNG export region by 2030. That is just enough capacity to meet our expectations for LNG feedgas demand, but there are several more facilities and expansions in development that would require more inbound supply to run full. Assuming projects like Sabine Pass Stage 5, Lake Charles LNG, and Commonwealth LNG are all able to make FID, Gillis could see as much as 28 Bcf/d of LNG demand by the early 2030s. In this scenario, Texas Energy Gateway would not be the last pipeline project built in the region.
East Daley estimates the daily stacked rate on KMI’s Trident and Texas Access is ~$0.55/Mcf, while the stacked rate on Backfin and CP Express is ~$0.40/Mcf. We speculate that the rate on Mustang will also be in the ballpark of $0.30-0.40 given the shorter route relative to the paths offered by the other projects.
Given that Texas Gateway is a combination of greenfield pipeline and existing facility upgrades, EDA speculates that the project is in position to offer better returns than some of the alternatives that are purely greenfield expansions. Additionally, the Boardwalk project is unique among these options, as it offers full path service from Katy to Carthage to Gillis on one system.
See East Daley’s Southeast Gulf Supply & Demand Report for more information on the Gillis outlook. We expect the Boardwalk project to see interest from LNG facilities looking to expand supply diversity and gain access to a very liquid Katy hub
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Rigs:
The US gained 1 rig for the week ending Nov. 1, bringing the total rig count to 519. The Permian (-3), Uinta (-1) and Barnett (-1) lost rigs while the Anadarko (+4), ArkLaTex (+1) and Bakken (+1) gained rigs W-o-W.
At the company level, Western Midstream (-2), Salt Creek Midstream (-2), Cenovus (-2), Enterprise (-1), KMI (-1), M6 Midstream (-1), XTO Energy (-1) and San Mateo Midstream (-1) lost rigs on G&P systems while Targa (+2), EnLink (+2), ExxonMobil (+2), ONEOK (+1), Aethon Energy (+1), OXY (+1) and Summit Midstream (+1) gained rigs W-o-W.
See East Daley Analytics’ weekly Rig Activity Tracker for more information on rigs by basin and company.
Flows:
US natural gas volumes in pipeline samples increased 0.8%, averaging 69.2 Bcf/d for the week ending Nov. 9.
Major gas basin samples gained 0.8% W-o-W to 42.5 Bcf/d. The Haynesville sample increased 1.6% to 9.5 Bcf/d, while the Marcellus+Utica sample gained 0.2% to 32.2 Bcf/d.
liquids-focused basins increased 0.2% to 18.5 Bcf/d. The Permian sample declined 2.6% to 6.0 Bcf/d, while the Bakken sample gained 6.1% W-o-W.
Storage:
Traders and analysts expect the Energy Information Administration (EIA) to report a 34 Bcf injection for the week ending Nov. 6. Estimates also called for 34 Bcf in last week’s report, and the injection came in at 33 Bcf. A 34 Bcf injection would increase the surplus to the five-year average by just 1 Bcf to 163 Bcf. The storage comparison to last year would fall to a 17 Bcf deficit.
The official end-of-season inventory number is 3,915 Bcf, just 4 Bcf greater than East Daley’s forecast in the Macro Supply & Demand Report. This Thursday’s EIA report could be the last injection of the year, as colder weather hitting the Midwest and East Coast this week have pushed demand higher. There is also colder weather on the horizon for the western US in the 6- to 10-day outlook, and for the eastern half of the country 10-15 days out.
Prompt-month prices have rallied in response to the cooler temperatures, with the December contract up $0.23 to $4.56/MMBtu on Tuesday (Nov. 11). Cash prices have also responded, sending the Henry Hub to $3.79 in post-Veteran’s Day trading. Looking ahead to December, the weather will remain a large influence on the direction of prices. However, more baseload demand is also on the horizon from new LNG projects, including the start of feedgas to Corpus Christi’s Train 4 and Golden Pass’ Train 1. Plaquemines Phase 2 will also likely be taking more gas at its smaller modular trains. These developments will support firmer gas prices, regardless of the winter weather.
See East Daley Analytics’ latest Macro Supply & Demand Report for more analysis on the winter market outlook.
Calendar:
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