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Spot prices at the Waha hub collapsed to an average of just 12
cents per million British thermal units (mmBtu) for Wednesday.
That fell below the contract's prior all-time low of 21 cents in
February and compares with an average of $1.72/mmBtu so far this
year, $2.10 in 2018 and a five-year (2014-2018) average of
$2.80, according to data available on the Refinitiv Eikon going
back to 1991.
The equipment failure was on El Paso Natural Gas Pipeline Co
LLC's Lordsburg and Florida compressor stations. That failure,
which caused El Paso to declare a force majeure, cut the
operational capacity through the stations by about 0.2 billion
cubic feet per day to around 0.4 bcfd starting on Tuesday.
El Paso, which is a unit of Kinder Morgan Inc, said the
reduction will remain in effect until further notice.
The Permian is the biggest oil-producing shale basin in the
United States and since much of that oil comes out of the ground
with gas, it is also the nation's second-biggest shale gas
producing region, behind Appalachia in Pennsylvania, West
Virginia and Ohio.
With production of both oil and gas more than doubling to record
highs over the past five years, the pipeline infrastructure in
the Permian has not been able to keep up with the rapid growth
in output.
That has caused the basin's existing oil and gas pipes to become
constrained and forced some producers to burn or flare off some
of the gas associated with oil production.
Those gas constraints have trapped gas in the Permian and
depressed Waha prices, boosting the discount Waha trades at
below the U.S. Henry Hub benchmark in Louisiana.
That spread reached $2.79/mmBtu for Wednesday, its widest since
December. That compares with an average discount of $1.21 so far
this year, $1.06 in 2018 and a five-year (2014-2018) average of
34 cents.
Several new pipelines are being built or developed to enable
more gas to flow out of the Permian, including Oneok Inc's
WesTex and Roadrunner projects, Kinder Morgan's Gulf Coast
Express and Permian Highway projects and NAmerico Energy
Holdings' Pecos Trail.
Drillers will, however, have to wait until late 2019 and beyond
for those projects to enter service.
(Reporting by Scott DiSavino; Editing by Chizu Nomiyama
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