The Waha Hub natural gas price continues to fall below the Henry Hub price - Today in Energy - U.S. Energy Information Administration (EIA)

2022-09-24 11:28:38 By : Ms. Aileen AI

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Since late 2021, the difference has been widening between the natural gas price at the Waha Hub in West Texas and the U.S. benchmark Henry Hub in Louisiana. The price of natural gas traded at the Waha Hub, which is near production from the Permian Basin, averaged $1.43 per million British thermal units (MMBtu) less than the Henry Hub price during the first half of September. In comparison, in the first half of September 2021, natural gas at the Waha Hub traded at an average of 24 cents/MMBtu less than the Henry Hub price.

Production rates in a region, in addition to the availability of infrastructure to transport natural gas to high-demand regions, can influence regional natural gas prices. Recent pipeline maintenance in the Permian Basin area has contributed to a wider price difference between the Waha Hub and the Henry Hub. On May 2, natural gas flows out of the Permian Basin on Kinder Morgan’s Permian Highway Pipeline decreased, and the Waha Hub price fell $1.82/MMBtu below the Henry Hub price. Last month, maintenance on the El Paso Natural Gas Pipeline reduced flows from West Texas into the Desert Southwest and California, contributing to a Waha Hub price that was $1.78/MMBtu lower than the Henry Hub price on August 26. On September 16, the Waha Hub price dropped $2.06/MMBtu below the Henry Hub price because production in the Permian region remains at relatively high levels.

Most natural gas production in the Permian Basin is associated gas, a by-product of (or associated with) crude oil production. Natural gas production in the Permian Basin more than doubled in the past five years and reached an annual high of 16.7 billion cubic feet per day (Bcf/d) in 2021 as a result of increasing crude oil production in the region over the same time period.

From 2018 through early 2020, natural gas production in the Permian Basin grew faster than pipeline take-away capacity. Given limited transportation capacity to transport natural gas to consuming centers, producers sold their natural gas at discounted prices. As a result, in 2019, the Waha Hub price averaged $1.66/MMBtu lower than the Henry Hub price.

In 2021, additional pipeline capacity to transport natural gas out of the Permian Basin entered service, and the price difference between the Waha Hub and the Henry Hub narrowed. Increased pipeline capacity enabled Permian region producers to deliver natural gas to demand centers in Mexico and along the Texas Gulf Coast, including to liquefied natural gas (LNG) export facilities. Since April 2022, additional pipeline projects out of the Permian Basin have been announced that would expand pipeline takeaway capacity by approximately 4.2 Bcf/d by the end of 2024.

Tags: prices, natural gas, spot prices, pipelines, Henry Hub, capacity, map

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