Pipeline maintenance on the Texas Gas system puts Haynesville producers on alert

Carthage spot gas prices rise 6-7 cents/MMBtu

Haynesville gas production drops 700 MMcf/d

Operators in the Haynesville shale could see pressure on natural gas prices and/or production over the next several weeks as a nearly month-long maintenance on a key southbound pipeline gets underway.

In a critical notice published April 13, Texas Gas Transmission notified shippers that it would be conducting maintenance at two pipeline interconnections in Ouachita Parish, north-central Louisiana from June 13 through July 11. According to the pipeline operator, the scheduled maintenance will reduce flow capacity at the two interconnection points to zero for the entire 28-day period.

According to a pipeline flow analysis from S&P Global Commodity Insights, deliveries at the Lonewa interconnection from Gulf South Pipeline to Texas Gas are the most likely to be affected by the maintenance, considering the volumes of recent flows there. Deliveries to the Atmos-Shovan interconnection to Texas Gas are less likely to see a major impact, according to the analysis.

A key transmission corridor for gas production in north-central Lousiana moving southbound to the US Gulf Coast market, Gulf South delivers a significant volume of output from Haynesville to Texas Gas, with few other outlets. Over the past month, deliveries from Gulf South to Texas Gas at Lonewa have averaged 580 MMcf/d. On July 13, flows at the interconnection point dropped to zero, data from S&P Global Commodity Insights showed.

While Texas Gas may be able to source additional gas production from other pipelines to compensate for lost deliveries at Lonewa, Gulf South Pipeline may have fewer options for distributing Haynesville production to end-user markets—potentially pressuring upstream prices and/or production in the Haynesville.

Prices, production

In June 13 trading, gas prices at Haynesville’s benchmark supply hub, Carthage, rose about 6-7 cents on the day to trade just below $2/MMBtu—only a modest discount to Henry Hub, preliminary settlement data from S&P Global Commodity Insight showed.

In the forward gas market, the balance-of-month contract at Carthage has also seen little change this month, most recently settling at $1.97/MMBtu, or only about 13 cents behind Henry Hub—potentially an indication that traders anticipate a limited impact on Haynesville gas prices during the maintenance.

On June 13, though, upstream receipts from the Haynesville were down nearly 700 MMcf on the day, tumbling to an estimated 15.7 Bcf/d, or the lowest since early April, S&P Global data showed. Although potentially subject to revision, the daily drop in receipts from Haynesville could signal looming production pressure in the weeks to come. Alternatively, it’s possible that more Haynesville gas is already being diverted to intrastate pipelines, which are not required to publicly report flow volumes.