Executive Summary:
Infrastructure: Investors see an opportunity in new storage projects to manage rapid LNG demand growth over the next four years.
Rigs: The US rig count decreased by 2 for the week of Feb. 7, bringing the total rig count to 525.
Flows: US natural gas volumes in pipeline samples increased 1.9% W-o-W, averaging 71.5 Bcf/d for the week ending Feb. 15.
Storage: Traders and analysts expect the EIA to report a 154 Bcf storage withdrawal for the week ending Feb. 13.
Infrastructure:
LNG demand along the Gulf Coast is expected to more than double by the end of the decade, requiring significant investments in pipelines. Recent regional price volatility also signals a need for more storage to manage rapid growth in the LNG corridor.
LNG projects in Louisiana and southeastern Texas currently account for just under 13 Bcf/d of market demand, including Sabine Pass, Cameron, Calcasieu Pass and Plaquemines LNG. Feedgas demand is poised to grow as high as 21.7 Bcf/d by early 2029, according to East Daley’s Macro Supply & Demand Report, when several large-scale projects will have started service: Golden Pass, CP2, Port Arthur LNG, and Louisiana LNG (see figure below from Energy Data Studio).
These LNG projects will create more demand at the Gillis hub in southwestern Louisiana and at other market centers in Louisiana and Texas. Demand from LNG terminals is already creating dislocation in regional prices at times, as shown by recent trading during Winter Storm Fern.
At the end of January, TETCO WLA prices (East Daley’s proxy for the Gillis hub) traded $1.63/MMBtu above the Henry Hub, spurred by demand and supply outages from the severe storm. For a brief period, WLA traded as much as $6.28 above the Henry Hub benchmark (see figure). Volatility like this creates opportunity for new storage projects, spurring buyers and sellers to seek more flexibility to manage regional price swings.
One such project is White Castle Energy Hub, a high-deliverability storage expansion in the emerging Louisiana LNG corridor. The project is holding a non-binding open season from Feb. 4 to March 4 for a salt cavern project in White Castle in Iberville Parish in southeastern LA.
Phase I targets a 2028 in-service and includes 20 Bcf of working capacity from three existing caverns ready for conversion. Phase I plans receipt and delivery points with several nearby inter- and intrastate ONEOK, LIG, Acadian, Sonat and TETCO.
Phase II plans for an additional 20 Bcf from two caverns currently under construction, with a planned in-service in 2030. Phase II would add new interconnects with Gulf South and Florida Gas. An upside expansion beyond 40 Bcf of working gas is feasible, depending on demand from the open season.
Gulf South Pipeline also recently held an open season for a 10 Bcf expansion at its Petal Gas storage complex in Mississippi. The open season, which ran through Feb. 4, followed commitments from two anchor customers for 8 Bcf of the proposed salt dome expansion. The Boardwalk Pipelines subsidiary aims to place the project in service by 2030.
East Daley sees opportunity for storage projects like White Castle and the Petal Gas expansion. On the one hand, Kinder Morgan’s (KMI) Trident Intrastate (+2 Bcf/d, ISD 1Q27) and the combined Blackfin – CP Express line (+3 Bcf/d) will create new capacity so Texas gas can reach Louisiana LNG demand growth. This will reduce the likelihood of constraints and should soften regional basis differentials.
However, we still expect some volatility, driven primarily by the timing of new infrastructure. While Blackfin is expected to come online as early as the end of 2026, the pipe only extends as far as Jasper County in Texas, and an interconnect with CP Express is necessary to move molecules across the border. CP Express is still under construction, and we expect that pipeline to primarily serve Venture Global’s CP2 LNG, which we don’t expect to come online before late 2027.
In the longer term, there will still be capacity constraints along major corridors in and out of Louisiana. Storage facilities like White Castle and Petal Gas will be necessary for balancing the market in the coming decades, and can provide significant windfall profits in the event of winter storms like Fern.
Rigs:
The US rig count decreased by 2 for the week of Feb. 7, bringing the total rig count to 525. The Permian (-2), ArkLaTex (-1), Bakken (-1) and Marcellus-NE PA (-1) lost rigs while the Eagle Ford and Powder River each gained 1 rig 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 1.9% W-o-W, averaging 71.5 Bcf/d for the week ending Feb. 15.
Flows in gas basins rose 2.4% as output continued to recover from impairments caused by Winter Storm Fern in late January and early February. The Marcellus+Utica sample increased 3.6% to 32.6 Bcf/d, while the Haynesville sample declined1.5% W-o-W to 10.2 Bcf/d.
Storage:
Traders and analysts expect the Energy Information Administration (EIA) to report a 154 Bcf storage withdrawal for the week ending Feb. 13. A 154 Bcf draw would shrink the deficit to the 5-year average from -130 Bcf to -125 Bcf. The deficit to last year would narrow by 28 Bcf to -69 Bcf.
Following this Thursday’s storage report, seven and a half weeks remain until the formal close of the winter withdrawal season. Through the week ending March 6, East Daley expects inventories to fall below 1,850 Bcf, which would shrink the deficit to around -20 Bcf. Weather at the end of March will be critical in determining the ultimate level of storage and the corresponding gas price heading into the spring injection season. It is usually around this time of the season that analysts can declare that winter is “over”.
This heating season has proved difficult to forecast as weather forecasts oscillate between extreme cold and extreme warmth. Current forecasts are trending warmer through the end of February, but we will wait until we get a view of March before making a declaration on whether winter is over or not. A small surplus or small deficit is the most likely outcome; how much or how little depends on the weather.
See East Daley’s latest Macro Supply & Demand Report for more on the winter market outlook
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