Natural gas prices to rebound

LNG export terminal fire big factor in depression

Natural gas prices have been tanking since a June 7 fire and explosion put the Freeport Liquefied Natural Gas Export Terminal on Quintana Island on the Texas Gulf Coast out of action and forced billions of cubic feet into storage.

But repairs are progressing and the terminal will be online in November.

Odessa oilman Kirk Edwards and spokesmen for the Texas Pipeline Association, Panhandle Producers & Royalty Owners and Texas Independent Producers & Royalty Owners say things are looking up just in time for a tough winter in Europe, one of the top LNG markets.

The price was over $8 per million British Thermal Units before the blast and $5.364 Thursday.

“The main reason for the softening of natural gas prices was that Freeport, one of the biggest LNG exporters, had a fire four months ago that shut down their exporting capabilities,” said Edwards, one of the largest gas producers in the Panhandle. “They’d been exporting two billion cubic feet a day.

“So the gas we normally would have been exporting to Europe has been going into storage — 240 billion cubic feet since the fire.”

A thousand cubic feet is roughly equivalent to a million BTU.

Edwards said another negative event was the Sept. 26 undersea sabotage explosions of the Nord Stream 1 and 2 pipelines between Russia and Germany. “I think that once Freeport comes back and Europe starts getting the majority of gas produced in this country, we will see some very positive prices,” he said.

“You have to realize, too, that LNG prices in Europe are roughly $60 per million BTU.”

Edwards said Europe ‘“is still reeling” from the disabling of the Nord Streams.

“Somebody went down under several hundred feet of water and blew them up,” he said.

“It was probably Russia because it adds more uncertainty to natural gas prices. If we get a cold winter, there’ll be another big upward pressure for natural gas prices and with Freeport coming back on, I’m very bullish for the industry.”

TPA President Thure Cannon said it is “almost impossible to predict what natural gas pricing will do, especially with so many monumental factors affecting the market, including the war in Ukraine.

“We do know Kinder Morgan is expanding the Permian Highway (pipeline) to add an additional 1.2 billion cubic feet per day in take-away capacity from the Permian Basin,” Cannon said from Austin. “This is expected to be completed by fourth quarter of 2023.

“In addition, WhiteWater, EnLink Midstream, Devon Energy and MPLX LP are planning the Matterhorn Express for the third quarter of 2024, which will transport up to 2.5 Bcf of natural gas from the Waha gas hub (near Coyanosa, 60 miles southwest of Odessa) to Katy.

“There are several other pipeline ventures planned as well.”

Cannon said the projects “are vital to the State of Texas with its rapidly growing population and number of energy-intense businesses coming here.

“It’s imperative that we increase our infrastructure to meet the growing demands of the state,” he said.

PPRO President Judy Stark agreed that conditions are improving. “I think Europe is likely to have enough supplies of LNG without Russia,” Stark said from Amarillo.

“The addition of more infrastructure going to the Gulf Coast will benefit not only the U.S. but also the world with cheaper, more reliable, abundant fuel sources.”

TIPRO President Ed Longanecker said energy markets “are subject to the laws of supply and demand just like any other market.

“Over the past few months, we’ve witnessed an artificial compression of supply in both oil and natural gas thanks to OPEC’s oil output cuts and the flow of Russian natural gas to Europe coming to a trickle,” Longanecker said from Austin.

“As winter sets in and temperatures drop, energy demand will increase and with shortened supply and high demand come higher prices. However, good energy policy from the U.S. focused on increasing the supply of oil and gas could lessen the shock of higher prices.”

He said continued investments in energy infrastructure like LNG export terminals and refineries are essential to meeting global energy needs.

“New infrastructure projects are not only necessary for our state, they also benefit communities beyond Texas’ borders and ensure energy security and reliability for decades to come,” Longanecker said.

Citing the U.S. Energy Information Administration, he said five new pipeline projects will increase the Basin’s gas take-away capacity by a combined 4.18 billion cubic feet per day over the next two years.

“This includes the Matterhorn Express Pipeline, a 580-mile line that will transport natural gas from the Permian Basin to Katy outside of Houston,” Longanecker said. “Once completed, the Matterhorn Express will transport up to 2.5 billion cubic feet of natural gas per day — the equivalent of supplying heat to at least two million homes every day.”

Longanecker said the EIA predicts America will increase its LNG exports to 12.34 billion cubic feet per day next year, leading the world.