Natural gas prices at the Waha hub in west Texas will continue to face downward pressure and volatility until additional takeaway capacity comes online in the Permian basin, according to an executive of independent shale producer Diamondback Energy.
"Waha I feel like is going to be pressured for quite some time. You have Matterhorn [Express pipeline] coming on, but infrastructure projects always seem to kind of move out," Diamondback Energy chief operating officer Daniel Wesson said on the sidelines of the CERAWeek by S&P Global conference in Houston, Texas, on Wednesday.
The Matterhorn Express, a joint pipeline project between WhiteWater Midstream, Devon Energy, MPLX and Enlink, is expected to move 2.5 Bcf/d (71mn m³/d) from the Waha hub to the Katy area near Houston when it comes online in September. Once that happens, Wesson said he expects to see a more narrow alignment for the spread between the Waha hub and the US benchmark, the Henry Hub.
Sellers have needed to pay buyers to take gas at Waha since 11 March, with the index this week hitting its lowest levels in more than a year at -$1.24/mmBtu. Spot prices have been driven down this month by capacity constraints and low weather-related demand. The spread between Waha and Henry has been wider than $1/mmBtu since 4 March. Waha's April, May and June contracts were all below $1/mmBtu as of Wednesday, according to Argus forward curves data.
Even after Matterhorn Express, Wesson said the Permian will eventually need another natural gas pipeline.
Despite the demand for increased takeaway capacity in the Permian, new gas line projects tend to get announced only following confirmed support from producers in the form of long-term contracts. US midstream company Kinder Morgan in 2023 estimated a new Permian gas pipeline would need to enter service between 2026-27 to keep up with demand for takeaway.
"Some of the consolidation in the basin will help get that done, now you have bigger players people won't be afraid to help support a pipe," Wesson said, referencing a string of M&A activity that began in 2023.
