In Part I of this energy market commentary, BTU covered the impacts to 2018 withdrawal season natural gas storage levels and impacts to pricing. And recently with US storage levels and South Central region levels lagging the 5-year average, we have been getting questions about 1) the role growing Haynesville shale production will play in making up the storage deficit and 2) how flows on interstates in Louisiana are behaving considering the majority of salt dome storage is located along the Gulf Coast.
BTU Analytics has covered the Haynesville shale (Here Comes the Haynesville in October 2016, Perryville Natural Gas Supplying Growing Gulf Demand in June 2017, and The Hayensville A Sleeping Giant in September 2017) as well as the impact of increased demand along the Gulf Coast in the form of LNG exports. In Part II of this energy market commentary, BTU Analytics will look at the supply response and pipeline flows within Louisiana as the market responds to storage deficits for the remainder of the withdrawal season and into the injection season. Can Haynesville and Appalachian southbound flows access Gulf Coast storage fields to make up the deficit?
First if we look at BTU Analytics’ Haynesville shale production, we can see production has ramped strongly from approximately 3.5 Bcf/d level in summer 2016 to over 5.5 Bcf/d in January 2018 as shown below. For more information on BTU Analytics’ Haynesville shale production see our Upstream Outlook report.
The EIA South Central storage region is broken into salt field storage and non-salt field storage. As of the withdrawal for week ending January 26, 2018, the South Central storage total was at 719 Bcf, 30% below last year levels and 24% below the 5-year average. The storage at the salt fields in the South Central region for the same period is at 169 Bcf, 50% behind last year and right at the 5-year minimum – see below. Note the EIA defines South Central as Kansas, Oklahoma, Texas, Arkansas, Louisiana, Mississippi and Alabama.
The challenge for Haynesville supply as well as Appalachian supplies flowing from north to south on interstates in Louisiana (including ANR, Tennessee, Trunkline, Gulf South, Texas Gas and Columbia Gulf) is that flows along the pipeline corridor to reach the large salt dome storage fields (shown in red) located along the Gulf Coast are nearing corridor capacity at times this winter.
If we look at flows on interstate pipelines in Louisiana we see since January 2015, flows have been consistently southbound, moving Appalachian and Haynesville supply to demand, most notably Sabine Pass LNG, along the Gulf Coast.
The question is, will constraints develop between Northern Louisiana and the Gulf Coast? Certainly the South Central region storage levels have some ground to make up coming out of the withdrawal season. BTU estimates that North-to-South capacity on interstates in Louisiana is approximately 6 Bcf/d. As winter demand wains in the Upper Midwest and Northeast, increasingly new incremental production volumes from Appalachia and the Haynesville will be looking for a home. In what may be a harbinger of things to come, on January 25, 2018 southbound flows in Louisiana surged to close to 6 Bcf/d, meanwhile Perryville cash basis jumped to 31 cents, up from 12 cents the previous day. To track these dynamics more closely, request more information about BTU Analytics’ Henry Hub Outlook.