|
Flows
Frigid temperatures are on the horizon across the U.S. from Jan. 18–25 and will bring high potential to disrupt natural gas production. Forecasts are calling for single-digit lows in the Bakken and Rockies, freezing temperatures in the Permian and Haynesville and single-digit temps to hit the Northeast by the night of Jan. 19. This weather pattern will likely lead to freeze-offs across producing basins, potentially curbing output across the U.S. while high demand leads to elevated prices.
Early January cold weather has already shown up and caused some negative impacts to production (see the weekly sample table below). Pipeline samples since Jan. 6 indicate a 2.1 Bcf/d drop vs. the December '24 monthly average, with significant declines in the Northeast (-1.1 Bcf/d), Anadarko (-0.3 Bcf/d) and Permian (-0.2 Bcf/d).
The drop in production comes as demand ramps for LNG exports. The Plaquemines LNG project has begun commissioning, leading to a new record delivery of 15.49 Bcf/d to LNG terminals on Jan. 11. However, the partial outage at Freeport LNG beginning Jan. 12 may ease demand slightly if it remains offline.
Past winter storms illustrate the potential scale of supply disruptions. Winter Storm Uri (February '21) reduced Lower 48 production by 7% (6.9 Bcf/d), primarily affecting the Haynesville and Permian. Winter Storm Elliott (December '22) cut output by 2% (2.1 Bcf/d), primarily in the Bakken and Appalachia. Last season, Winter Storm Heather (January '24) caused a 3% (2.8 Bcf/d) decline nationwide, offering parallels to the current forecast.
Infrastructure
The recent winter storms have ignited heating demand and increased flows on expanded segments of Williams’ (WMB) Transcontinental Gas Pipeline (Transco), including the newly started Southside Reliability Enhancement (SRE) project.
WMB placed the SRE expansion into full service on Dec. 30, 2024. SRE expands capacity in southern Virginia by 423,000 Dth/d from Compressor Station 165 through Transco’s South Virginia Lateral. Local utility Piedmont Natural Gas has contracted for the expansion, providing the shipper with firm capacity instead of relying on uncertain interruptible service.
Following the SRE project in-service, flows through Transco’s Compressor Station 167 jumped to new daily highs. The highest throughput before the project was about 660 MMcf/d, but flows reached over 800 MMcf/d last week (Jan. 5-11) as a winter storm hit the Mid-Atlantic (see figure). The immediate fill of the expansion demonstrates the value of new capacity in the Atlantic region during periods of peak winter demand.
Further north on the Transco system, EDA has reviewed flows associated with the Regional Energy Access (REA) expansion. About half of the 829,400 dekatherm/d project entered service in October ’23 at the start of the 2023-24 heating season, and Station 515 on the Leidy line saw record flows of 2.65 Bcf/d. The second phase entered service in July '24, and the Station 515 meter posted a new high of 2.69 Bcf/d in early January ’25 (see figure).
The immediate fill of the Transco projects show their value when winter demand peaks on the East Coast. WMB has a lengthy docket of Transco projects and will look to continue its successful execution on the Texas to Louisiana Energy Pathway (1Q25), Southeast Energy Connector (2Q25), Commonwealth Energy Connector (4Q25), Alabama Georgia Connector (4Q25), and Gillis West (4Q25). All of these projects are slated to enter service in 2025.
Flows
Winter storms across much of the U.S. curtailed some natural gas production from Jan. 5-12. The largest declines occurred in the Anadarko, Appalachian, Permian and ArkLaTex basins. Production started falling last Monday (Jan. 6) as wellheads and equipment froze in freezing temperatures. Regional pipe samples declined by 2.6 Bcf/d from the week of Dec. 30 – Jan. 5 vs. Jan. 6–12 (see table). The Appalachian (-1.0 Bcf/d), Haynesville (-0.4 Bcf/d) and Permian (-0.4 Bcf/d) basins saw the largest declines in samples.
We expect a larger impact next week when a powerful Arctic blast is forecast to bring frigid temperatures to the Midwest and eastern U.S. This cold wave is expected to plunge temperatures significantly below average, affecting regions from the northern Plains to the Gulf Coast. The Northeast and Great Lakes areas may experience increased snowfall due to this Arctic outbreak.
While production freeze-offs are a concern during cold weather, the impact on storage inventories could be more serious. With less produced gas and elevated Res/Com demand, storage withdrawals are likely to be significant.
Storage
Traders and analysts expect the Energy Information Administration (EIA) to report a 256 Bcf withdrawal from storage for the week ending Jan. 10. A 256 Bcf withdrawal would be 128 Bcf more than the 5-year average and would cut the surplus to just 79 Bcf, the lowest level since the week ending Jan. 13, 2023. Storage levels vs. last year would be firmly in deficit territory, growing from a 3 Bcf deficit last week to a 109 Bcf deficit.
The large withdrawal expected Jan. 16 will be followed by another large draw for the week ending Jan. 17. Estimates for that survey also call for a withdrawal around 250 Bcf, putting further pressure on the five-year surplus down into the single digits.
Weather for the balance of January is trending colder than the 10-year normal, setting up a potential monthly storage draw of 1 Tcf. That would be one of the biggest withdrawal months of all time. January 2014 and January 2022 both saw net withdrawals of 950 Bcf or greater. A 1 Tcf withdrawal for January 2024 would exceed January 2022 by 9 Bcf.
In the latest Macro Supply & Demand Report, East Daley calls for the Lower 48 to exit March at 1,924 Bcf (March 31) assuming normalized weather. However, we expect to revise down our forecast given January’s frigid weather.
Rigs
The U.S. rig count decreased by one for the Jan. 4 week, standing at 528. The Permian (-1), Anadarko (-1), Eagle Ford (-1) and Bakken (-1) lost rigs while the ArkLaTex (+1), Marcellus + Utica (+1) and Barnett (+1) added rigs on the week.
On the midstream side, Targa Resources (TRGP) is up nine rigs net with additions on all its Permian systems as well as its Anadarko systems. Energy Transfer (ET) lost four rigs total on its Permian and ArkLaTex systems.
East Daley’s weekly Midstream Activity Tracker monitors rig activity by basin and by gathering and processing (G&P) system to better understand midstream impacts. We allocate rigs and monitor flows through 150+ public and privately owned G&P systems in every North American basin. Reach out for more information on the Midstream Activity Tracker.
The Daley Note
Subscribe to East Daley’s The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices, and EDA research likely to affect markets in the short term..
|
