Permian oil pipelines aggravate gas glut
Natural gas prices in the Permian basin are plumbing new lows this spring as long-awaited oil pipelines start service, leaving west Texas markets awash with new gas supplies.
Prices at Waha in west Texas dropped to a record low yesterday of -$3.35/mmBtu, and have averaged a -$1.35/mmBtu in the past week, flipping from an average of $1.92/mmBtu a year earlier. Waha prices in the month-ahead market for April averaged -11¢/mmBtu.
The biggest driver of these natural gas lows are a string on new oil infrastructure projects that have helped ease Permian bottlenecks that limited oil production growth. Enterprise started service last month on a 45,000 b/d expansion of the Midland-to-Sealy pipeline; In February, Enterprise began filling a 200,000 b/d converted NGL line that runs to the Houston, Texas, area; and Plains All American started its Sunrise pipeline expansion, a 500,000 b/d line that is probably moving about 300,000-350,000 b/d.
Permian basin oil wells produce large amounts of gas, meaning as oil output grows so do natural gas flows, keeping pressure on prices. The Permian is the second-largest largest gas field by volume, trailing only the Marcellus shale in Pennsylvania and the surrounding states.
Recent oil pipeline expansions have resulted in an additional 500mn cf/d (14mn cf/d) of associated gas output, the energy consultancy BTU Analytics said. Gross gas production from the Permian topped 13.6 Bcf/d (385mn m³/d) in February, up by 38pc from a year earlier, according to the most recent US government data.
Natural gas pipelines have not kept pace with oil, leading to an oversupply that is forcing prices at key west Texas gas indexes below zero. Those negative prices can affect the profitability of oil wells and lead to increases in flaring.
The next major expansion of gas takeaway capacity, Kinder Morgan's $1.75bn, 2 Bcf/d Gulf Coast Express, is scheduled to start service next October.
Pipeline companies have added pipeline capacity from west Texas into Mexico, but those projects have yet to offer any significant outlet for production, because of infrastructure delays on the other side of the border. A minor amount of capacity has also been added on intrastate lines in Texas.
Permian prices have also faced downward pressure as winter cold subsided and as a force majeure on the El Paso Natural Gas pipeline system limited Permian gas flows to the west.
The US gas market entered its spring shoulder season on 1 April, a period usually marked by low weather-related demand.
A blast of cold weather can stoke demand for Permian gas by allowing those supplies to displace gas in other areas like the the Rocky Mountains.
Related news posts
US oil and gas deals slowing after record 1Q: Enverus
US oil and gas deals slowing after record 1Q: Enverus
New York, 23 April (Argus) — US oil and gas sector mergers will likely slow for the rest of the year following a record $51bn in deal in the first quarter, according to consultancy Enverus. Transactions slowed in March and the second quarter appears to have already lost momentum, according to Enverus, following the year-end 2023 surge in consolidation that spurred an unprecedented $192bn of upstream deals last year. The Permian shale basin of west Texas and southeastern New Mexico continued to dominate mergers and acquisitions, as companies competed for the remaining high-quality inventory on offer. Acquisitions were led by Diamondback Energy's $26bn takeover of closely-held Endeavor Energy Resources . Others include APA buying Callon Petroleum for $4.5bn in stock and Chesapeake Energy's $7.4bn takeover of Southwestern Energy . The deal cast a spotlight on the remaining private family-owned operators, such as Mewbourne Oil and Fasken Oil & Ranch, which would be highly sought after if they decided to put themselves up for sale. "However, there are no indications these closely held companies are looking to exit any time soon," said Andrew Dittmar, principal analyst at Enverus. "That leaves public explorers and producers (E&P) looking to scoop up the increasingly thin list of private E&Ps backed by institutional capital and built with a sale in mind — or figuring out ways to merge with each other." Deals including ExxonMobil's $59.5bn takeover of Pioneer Natural Resources, as well as Chevron's $53bn deal for Hess, have attracted the attention of anti-trust regulators. The Federal Trade Commission has also sought more information on the Chesapeake/Southwestern deal. "The most likely outcome is all these deals get approved but federal regulatory oversight may pose a headwind to additional consolidation within a single play," said Dittmar. "That may force buyers to broaden their focus by acquiring assets in multiple plays." By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
USGC LNG-VLSFO discount to steady itself
USGC LNG-VLSFO discount to steady itself
New York, 23 April (Argus) — The premium for US Gulf coast (USGC) very low-sulphur fuel oil (VLSFO) to LNG is expected to linger but not widen this spring, maintaining interest in LNG as a bunkering fuel. US Gulf coast LNG prices slipped from a premium to a discount to VLSFO in March 2023 and have remained there since. The discount surpassed 200/t VLSFO-equivalent in January (see chart). Both LNG and VLSFO prices are expected to remain under downward pressure due to high inventories, which could keep the current LNG discount steady. The US winter natural gas withdrawal season ended with 39pc more natural gas in storage compared with the five-year average, according to the US Energy Information Administration (EIA). Henry Hub natural gas monthly average prices dropped below $2/mmBtu in February, for the first time since September 2020, Argus data showed. The EIA expects the US will produce less natural gas on average in the second and third quarter of 2024 compared with the first quarter of 2024. Despite lower production, the US will have the most natural gas in storage on record when the winter withdrawal season begins in November, says the EIA. As a result, the agency forecasts the Henry Hub spot price to average less than $2/mmBtu in the second quarter before "increasing slightly" in the third quarter. EIA's forecast for all of 2024 averages about $2.20/mmBtu. US Gulf coast VLSFO is facing downward price pressure as demand falls and increased refinery activity signals a potential supply build . Rising Gulf coast refinery activity was likely behind some of the drop in prices. Gulf coast refinery utilization last week rose to 91.4pc, the highest in 12 weeks and up by 0.9 percentage points from the prior week. US Gulf coast suppliers are also eyeing strong fuel oil price competition from eastern hemisphere ports such as Singapore and Zhoushan, China, importing cheap Russian residual fuel oil. In general, LNG's substantial discount to VLSFO has kept interest in LNG for bunkering from ship owners with LNG-burning vessels high. The EIA discontinued publishing US bunker sales statistics with the last data available for 2020. But data from the Singapore Maritime & Port Authority, where the LNG–VLSFO discount widened to over $200/t VLSFOe in February, showed Singapore LNG for bunkering demand increase 11.4 times to 75,900t in the first quarter compared with 6,700t in the first quarter of 2023 and 110,900t for full year 2022. By Stefka Wechsler US Gulf coast LNG vs VLSFO $/t VLSFOe Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India’s Chhara LNG terminal faces commissioning delay
India’s Chhara LNG terminal faces commissioning delay
Mumbai, 23 April (Argus) — Indian state-owned refiner HPCL's 5mn t/yr Chhara LNG import terminal is again facing delays in receiving and unloading its commissioning cargo, a market source told Argus . Fender failure at the terminal has caused problems in berthing the LNG vessel. The fender acts as a buffer or cushion between the ship hull and the dock, and prevents damage as a result of contact between the two surfaces. HPCL on 22 April issued a tender offering the commissioning LNG cargo , which is onboard the 160,000m³ Maran Gas Mystras. The vessel is currently laden offshore the terminal and ready to redeliver to another Indian LNG terminal on 25-30 April, according to HPCL. The company is seeking bids at a fixed price, and custom duty has already been paid by the firm. Indian firm Gujarat State Petroleum (GSPC) facilitate HPCL's purchase of the cargo on 26 March, with the cargo for delivery over 9-12 April. HPCL has put up the commissioning cargo for auction, and it can be discharged from any alternative port in India. LNG terminals closer to Chhara include Indian state-controlled importer Petronet's 17.5mn t/yr Dahej, Shell's 5.2mn t/yr Hazira or state-owned gas distributor Gail's 5mn t/yr Dhabol LNG terminal. HPCL also has not awarded a tender that is seeking another early-May delivery cargo , which closed on 19 April. Commissioning of the Chhara LNG terminal has been delayed since September 2022 owing to pipeline issues. The terminal is the country's eighth LNG import facility, which would lift total regasification capacity to 52.7mn t/yr from 47.7mn t/yr currently. The pipeline runs from the terminal and connects the city gas distribution network from Lothpur to Somnath district in Gujarat. There has been a delay in opening the pipeline as it passes through the eco-sensitive zone of the Gir wildlife sanctuary for 25.816km, a government document shows. The facility was completed in February, but is set to be closed from 15 May-15 September ahead of the completion of a breakwater facility , which is required to ensure safe LNG tanker berthing during India's monsoon season. No specific timeline has been given for building the breakwater, but the terminal will be able to operate year-round once it is completed. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
TotalEnergies to fully own Malaysian gas firm SapuraOMV
TotalEnergies to fully own Malaysian gas firm SapuraOMV
Singapore, 23 April (Argus) — TotalEnergies has signed an agreement to acquire Sapura Upstream Assets' 50pc stake in Malaysian private gas producer and operator SapuraOMV, which will take TotalEnergies' total stake to 100pc. The acquisition will cost $530mn, subject to closing adjustments, with closing expected to take place in the second half of this year, said TotalEnergies. This latest deal follows a previous agreement that TotalEnergies signed in January with Austrian firm OMV to acquire its 50pc interest in SapuraOMV. This means TotalEnergies will own 100pc of SapuraOMV once both transactions are completed. "Following the transaction with OMV announced two months ago and this new transaction with Sapura Upstream Assets, TotalEnergies will have full ownership of SapuraOMV and become a significant gas operator in Malaysia," said TotalEnergies' chairman and chief executive officer Patrick Pouyanné. "The SapuraOMV assets are fully in line with our strategy to grow our gas production to meet demand growth, focusing our portfolio on low-cost and low-emission assets," he added. SapuraOMV in 2023 produced 500mn ft³ of gas, which was used to feed the Bintulu LNG plant operated by state-controlled Petronas, as well as 7,000 b/d of condensates. SapuraOMV holds 40pc and 30pc operating interests, respectively, in blocks SK408 and SK310, which are offshore Sarawak, Malaysia. Block SK408's Jerun gas field, which could hold up to 84.9bn m³, is on track to start up in the second half of this year. SapuraOMV also has interests in exploration licences in Malaysia, Australia, New Zealand, and Mexico, where there was a discovery on block 30 last year, with estimated resources of 200mn-300mn bl of oil equivalent. TotalEnergies holds interests in two production sharing contracts in Malaysia. It in June last year signed an agreement with Petronas and Japanese trading firm Mitsui to jointly develop a carbon capture and storage project in Malaysia as well as assess maturing depleted fields and saline aquifers for storage. The firms hope to develop a CO2 merchant storage service to help industrial customers in Asia decarbonise. By Prethika Nair Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more