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More natural gas pipelines have entered into service in recent months to carry gas from the Permian basin to Mexico, boosting U.S. gas exports to America’s neighbor to the south and reducing the wide discount at which gas traded at the Waha Hub in Texas.
Two natural gas pipelines have been completed in Texas since October 2020 and two others in Mexico, increasing the connectivity between natural gas producers in the Permian basin and the main markets for natural gas in the area and in Mexico, the U.S. Energy Information Administration (EIA) said on Tuesday.
In the U.S., Kinder Morgan’s Permian Highway Pipeline, which entered service in early January 2021, brought an additional 2.1 Bcf/d of natural gas capacity from the Waha Hub in West Texas near production sites in the Permian to Katy, Texas, near the Gulf Coast. The Permian Highway Pipeline has additional connections to Mexico.
The Agua Blanca Expansion Project of Whitewater/MPLX started operations at the end of January, connecting to nearly 20 natural gas processing sites in the Delaware Basin and transporting an additional 1.8 Bcf/d of natural gas to the Waha Hub. Agua Blanca is planned to also connect with the Whistler Pipeline scheduled to be completed in the third quarter of 2021 and expected to carry 2.0 Bcf/d of natural gas from the Permian to the Texas Gulf Coast.
The rise in natural gas transportation capacity contributed to higher U.S. exports to Mexico. As per the latest data from the EIA, U.S. pipeline exports have increased by nearly 10 percent since March last year. In March 2021, U.S. pipeline gas exports to Mexico stood at 5.9 Bcf/d.
The increased gas pipeline takeaway capacity also raised the gas prices at the Waha Hub and narrowed the discount of the gas price in West Texas to the U.S. benchmark at Henry Hub.
In the years before the 2020 crisis, prices at the Waha Hub even flipped to negative at times amid pipeline constraints and occasional issues at compressor stations.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.