These are the summary data points:
- southbound corridors from Carthage, Perryville becoming constrained
- estimated 1.5 Bcf/d capacity remains from Midwest, Northeast, Permian
- summer-2020 Gulf Coast demand growth anchored by LNG liquefaction
As summer approaches, the situation will worsen; producers will do what it takes to get their product in the pipeline, and the discounts will widen.
While flow data along much of the North-to-South corridor appears to suggest ample capacity to reach the Gulf Coast, bottlenecks actually exist closer to locations like Henry Hub and Houston Ship Channel.
From the article:
For Midwest and Northeast gas flowing to the Gulf Coast on key interstate corridors – ANR Pipeline, Columbia Gulf Transmission, Natural Gas Pipeline Co. of America, Tennessee Gas Pipeline, Texas Eastern Transmission, Texas Gas Transmission, Trunkline Gas and Transcontinental Gas Pipe Line – congestion south of Carthage in West Louisiana and south of Perryville in the state's northeast will pose serious constraints to gas moving southbound next summer.
According to Platts Analytics, approximately 500 MMcf/d of available capacity remains between Carthage and Houston Ship Channel on Gulf South Pipeline, NPGL, Tennessee and Texas Eastern.
From Perryville to Henry Hub, a combined 83% utilization rate last summer on ANR Pipeline, Columbia Gulf, Tennessee, Texas Gas and Trunkline left about 1 Bcf/d of available capacity along the other key southbound corridor.
Including the eastbound corridor from the Permian Basin, Platts Analytics estimates that last summer, roughly 1.5 Bcf/d of spare capacity to Houston Ship Channel and Henry Hub remained from West Texas, Carthage and Perryville.
Compared to summer 2019, demand along the East Texas and Louisiana Gulf Coasts is forecast to rise about 4 Bcf/d, anchored principally by the growth in LNG liquefaction activity.
[So, if I'm reading this correctly, there may be 1 Bcf/d of available capacity, but demand is likely to rise above 4 Bcf/d -- if I'm reading that correctly -- holy mackerel -- that's a huge gap.]
At Freeport LNG, the startup of commercial service at Train 2 and Train 3 is expected by February and June, respectively.
At Cameron LNG, Train 2 and Train 3 are scheduled to enter service by April and August.
Along with a higher anticipated utilization rate at Cheniere Energy's Sabine Pass, LNG producers will likely require an incremental 3.5 Bcf/d of gas this summer compared to last.
Additional factors weighing on the region's available supply include stronger demand from Gulf Coast power generators and industry, as well an anticipated decline in Gulf Coast and offshore gas production.
Compared to last summer, though, more supply should be delivered to the East Texas and Louisiana Gulf Coast region from Kinder Morgan's 2 Bcf/d Gulf Coast Express, which entered service last September.Hmmmm....one of my regular readers knows the natural gas pipeline story very, very well from an investment point of view. It will be interesting to see if she/he has anything to add regarding this story.
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Growing demand along the Gulf Coast from industrial projects and exports have driven up Houston Ship Channel basis relative to Henry Hub from a discount of $0.02 in the summer of 2017 to a premium of $0.11 for May 2017. While Houston Ship Channel and Henry Hub prices are both much stronger year over year, pricing at Carthage and Perryville have seen discounts to Henry Hub widen to $0.10 back.
It sounds like the discounts will be "bad" on the pipelines leading into Carthage and Perryville, but the discounts will be even greater on the pipelines between Carthage/Perryville and Henry Hub.