A force majeure on the Natural Gas Pipeline Co. of America LLC (NGPL) has cut feed gas deliveries to Cheniere Energy Inc.’s Sabine Pass LNG terminal through September, potentially increasing demand for natural gas from Henry Hub and Moss Bluff.
NGPL cited an outage on a unit at a compressor station (CS) in Liberty County, TX, that required repairs. Work began on Aug. 20 and is expected to last through Sept. 30. This could have knock-on effects on Henry Hub and Moss Bluff, Wood Mackenzie analyst Nadeem Ahmed said.
Beginning on the first day of the outage, eastbound capacity at CS 302 from segments 22 to 26 was cut by 75%, according to a notice on the NGPL electronic bulletin board. Eastbound flows, which were running at a maximum capacity of 1,200 MMcf/d, dropped on Aug. 20 to 900 MMcf/d at CS 302, NGPL said.
One of the major delivery points on CS 302 is the Sabine Pass liquefied natural gas facility, Ahmed noted. “Flow on eastbound CS 302 and delivery to Sabine Pass liquefaction are highly correlated.”
Ahmed said that with the 300 MMcf drop in eastbound flow on CS 302, NGPL’s delivery to Sabine Pass fell by 80 MMcf. To compensate for the lost volumes of gas going east of 302 CS, NGPL was drawing more gas from Moss Bluff and Henry Hub.
On the first maintenance day, Ahmed said NGPL had increased gas from Moss Bluff by about 120 MMcf. “The tightness in these gas hubs will persist until Sept. 30 with upward risk to prices.”
Cushioning feed gas flows into Sabine Pass are its other interconnects. In addition to Kinder Morgan Inc.’s (KMI) NGPL, gas flows come from KMI’s Louisiana Pipeline (KMLA), Cheniere’s Creole Trail Pipeline, and Williams’ Gulf Trace project.
Cheniere recently completed Creole Trail Gillis CS maintenance, restoring full operational capacity on the feeder line on Sunday, Criterion Research’s James Bevan, vice president of Research, said on the online energy platform Enelyst.
“They have not yet ramped deliveries via Creole Trail Pipeline,” Bevan added. “Instead, we continued to see higher inflows on KMLA as the pipe delivered 1.4 Bcf/d into the terminal.”
“We may see some Henry Hub price increase, but likely not much since that is not a huge capacity for total Sabine Pass capacity when taking all four pipes together,” NGI senior energy analyst Josiah Clinedinst said. He noted that Sabine Pass’ feed gas pipeline operational capacity was 5.7 Bcf/d. Therefore, “an 80 MMcf/d or even 100 MMcf/d reduction is 0.08 or 0.1 Bcf/d reduction on that total.”
In fact, since the capacity restrictions began, the national benchmark hub’s spot prices have tumbled. Henry Hub natural gas averaged $1.930/MMBtu on Monday, NGI data showed. That was 10.5 cents higher day/day and down 23.0 cents from $2.160 on the day the force majeure began. The spot price at Moss Bluff hub was pegged at $1.895 Monday, up 8.5 cents on the day and 16.5 cents below the $2.060 average on Aug. 20.
"Even though Henry Hub prices may have dropped in response to the 75% capacity cut to NGPL's Eastbound compression station 302, from segments 22 and 26, which caused a slight cut in deliveries from NGPL pipeline to Sabine Pass LNG, the average delivered gas to Sabine Pass has been about 4.29 Bcf/d since Aug. 20,” Clinedinst said. He noted that the other three delivery pipelines for Sabine Pass have picked up the slack.
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Meanwhile, total natural gas deliveries to domestic LNG facilities were 12.73 Bcf on Tuesday from 13.04 Bcf a day earlier, NGI’s U.S. LNG Export flow Tracker showed.
“The steady total natural gas supply being delivered to Sabine Pass may have contributed to the Henry Hub 10.5-cent increase on Monday,” Clinedinst said.
Weather outlooks, however, were likely capping upside momentum even as sweltering weather continued to grip Texas and spread across large swaths of the country this week.
NatGasWeather expected national demand “to be high to very high” over the next five days as much of the country could see high temperatures in the upper 80s to 100s. National demand was forecast to ease for the six- to 15-day period as the country’s northern half “becomes near perfect” with highs in the upper 60s to 80s.
Very warm weather conditions could continue to the south. California and Texas could see temperatures holding in the upper 80s to 100s, keeping the regions the hottest in the country, NatGasWeather said.
Through September, forecasts favored very nice temperatures over the northern half of the United States. That could keep national demand only moderate. The six- to 20-day outlook “just isn’t quite hot enough to intimidate as much of the U.S. experiences perfect late summer temperatures,” NatGasWeather said.
