El Paso sends more gas westbound in possible easing to capacity restrictions

Westbound flows from the Permian Basin on El Paso Natural Gas are up sharply over the past several days, signaling a potential easing of capacity restrictions linked to ongoing repair work on its Line 2000.

On Nov. 3, transmissions on El Paso's westbound mainline climbed to an estimated 2.28 Bcf/d, hitting the highest level since Aug. 15 when a segment of its Line 2000 suffered a failure, triggering the ongoing force majeure. On Nov. 4, westbound flows on the pipe were down modestly to about 2.19 Bcf/d, data compiled by S&P Global Platts Analytics showed.

Since the announcement of the force majeure on El Paso, a nearly 600 MMcf/d capacity restriction at the Cimarron compressor station, and other nearby compressors, has cut flows on the pipe to an average 1.98 Bcf/d, down from levels around 2.5 to 2.6 Bcf/d prior to the maintenance.

On Nov. 4, El Paso published an updated November maintenance calendar to its electronic bulletin board showing no apparent change to the ongoing pipeline restrictions on its Line 2000. According to the current schedule, ongoing capacity cuts will remain in place through the end of November.

On occasion, full or even partial completion to pipeline repair work results in an easing of some capacity restrictions prior to the announcement of any official change to the pipeline's operational status.

FM knocks production, prices

Over the past 11 weeks, the cut to westbound capacity on El Paso appears to have contributed, at least in part, to the recent downward pressure on Permian Basin gas production.

In the two months since the force majeure began, gas production in West Texas has dropped below 13.4 Bcf/d, down from an average 13.6 Bcf/d in the 30 days prior, Platts Analytics data shows. The drop in output from September to October is also likely due partly to weaker shoulder season demand.

Since the start of November, though, the jump in westbound flows on El Paso has correlated with a simultaneous rise in Permian gas production to 13.9 Bcf/d, month to date, Platts Analytics data shows.

In Southern California, the maintenance on El Paso has had its own separate impacts, cutting much-needed supply from West Texas and putting upward pressure on gas prices there.

On Aug. 16 – the first trading day after the force majeure was announced – the balance-of-month contract at the SoCal Gas city-gate jumped nearly $2, to settle at $7.80/MMBtu. In the cash market, prices gained over $3 to end trading $7.72/MMBtu, S&P Global Platts data shows.

Assuming an end to the El Paso force majeure is announced in the days ahead, it's possible that the SoCal Gas winter contracts – now priced in the mid- to upper-$8s/MMBtu for December and January – could see sizeable selloff.