A proposed Texas intrastate extension of the Matterhorn Express Pipeline could help preserve stronger pricing at the Katy and Houston Ship Channel benchmarks as more natural gas volumes flow from the Permian Basin, according to analysts.
Recent filings with the Railroad Commission of Texas outlined plans for the 193-mile Blackfin Pipeline, which would stretch from Colorado County to Jasper, according to East Daley Analytics analysts.
The project links with the 2.5 Bcf/d Matterhorn project, a 42-inch-diameter greenfield intrastate line to transport Permian volumes west-to-east across Texas. Matterhorn, sanctioned last May, is a joint venture between WhiteWater Midstream LLC, EnLink Midstream LLC, Devon Energy Corp. and MPLX LP.
As for the Blackfin line, the planned route suggests it would “primarily serve as additional egress to debottleneck the Katy area” once Matterhorn is in service, East Daley analyst Alex Gafford said.
“With more Permian supply set to move to the Gulf Coast via Matterhorn, a project like Blackfin would help prevent prices at Katy and the Houston Ship Channel from discounting compared to Transco Zone 2 at the Texas-Louisiana border,” according to Gafford.
A look at NGI’s Daily Gas Price Index historical data showed Transco Zone 2 moving to a fairly consistent premium in the second half of 2021 over Houston Ship Channel (HSC) and Katy. Notably, liquidity at Transco Zone 2 also accelerated last summer as prices soared to nearly $1.00 over HSC on some days. So far this year, Transco Zone 2 has averaged a roughly 30.0-cent premium over the Texas hubs.
When Matterhorn comes online, slated for the second half of 2024, it could impact pricing dynamics in the Permian, which has seen its share of negative basis differentials over the years. Waha flipped negative for the first time in April 2019 as Permian production remained trapped in-basin ahead of Kinder Morgan Inc.’s Gulf Coast Express entering service. The same thing happened in the spring of 2020 before the start-up of Permian Highway Pipeline. Sub-zero pricing also hit the region again this past fall.
“Given the size of the planned pipeline, it seems likely that Waha gas prices and basis are set to see better days by late 2024, but there will almost certainly be rough patches between now and then,” RBN Energy LLC analyst Jason Ferguson wrote as part of the firm’s outlook for Permian markets in 2023.
Affordable Permian supplies remain an enticing option for operators contemplating investments in LNG export opportunities along the Gulf Coast, Ferguson noted.
“The massive spread between the price of Permian gas and the markets primarily served on the margin by LNG in Europe and Asia” creates a positive investment for new liquefied natural gas export projects, he said.
“All those LNG projects are looking for supply, and most have identified the Permian as a key supply source,” Ferguson said. “Now they just need the pipelines to connect Point A to Point B, linking Waha to their terminals.”
