Waha Natural Gas Price Trade Widening Discount for Henry Hub to Boost Mexico – Natural Gas Intelligence | Jewelry Dukan

Natural gas prices at the Waha price point in west Texas continue to offer an attractive long-term option for offtakers, including in Mexico, according to analysis by the US Energy Information Administration (EIA).

Since late 2021, “the gap between the price of natural gas in Waha and the Henry Hub benchmark in Louisiana has “widened,” researchers said.

The price of natural gas traded in Waha averaged $1.43/MMBtu below the Henry Hub price in the first half of September. For comparison, in the first half of September 2021, natural gas at the Waha Hub traded an average of 24 cents/MMBtu below the Henry Hub price.

EIA analysts said that recent pipeline maintenance in the Permian Basin area has contributed to a larger price differential. Booming oil and gas production has also dampened prices in west Texas.

The Permian Basin, which feeds the commercial hub of Waha, is the second largest gas producing region in the United States after Appalachia and is growing. East Daily Capital forecasts US gas supply growth of 4.6 Bcf/day through the end of 2023, led by associated gas from the Permian Basin.

Natural gas production in the Permian Basin has more than doubled over the past five years, peaking at 16.7 Bcf/d in 2021, according to the EIA. Once weighed down by infrastructure deficits, more pipeline projects from the Permian Basin have been announced since April 2022, which would increase the pipeline’s take-away capacity by about 4.2 Bcf/d by the end of 2024.

“Brutally Attractive”

Mexico’s access to the Waha natural gas hub has been strengthened thanks to new infrastructure. These include Grupo Carso’s 472 MMcf/d Samalayuca-Sásabe pipeline and Fermaca’s Waha-to-Guadalajara, also known as Wahalajara, system. Wahalajara allows molecules from the Permian Basin to reach Guadalajara, Mexico’s second most populous city and a major industrial center.

Flows from west Texas to Mexico totaled 700 MMcf/d on Tuesday, according to NGI calculations. According to EIA research, imports from west Texas into Mexico increased 12% overall in the first five months of the year compared to the same period in 2021.

In May, exports from West Texas to Mexico averaged a record high of 1.6 Bcf/day, researchers said earlier.

Energy expert Rosanety Barrios tweeted that Waha prices were “brutally attractive” for Mexico. While the difference is less pronounced, Waha is also trading at a discount to the Houston Ship Channel, a key price point in Mexico.

She said Mexico is “the only country in the world that has two pipelines coming out of Waha, and that’s no coincidence, it’s the result of careful planning and in-depth knowledge of the market.”

However, she warned that the state-owned utility Comisión Federal de Electricidad (CFE), the anchor supplier of the country’s private pipelines, must properly manage the pipelines’ capacity in order to capitalize on the opportunity.

[Get in the Know: Access to pipelines, processing plants and LNG facilities is imperative to success in the Mexico natural gas market. Buy NGI’s 2022 Mexico map today.]

LNG Project Bonanza

Mexico’s west coast is also home to up to four separate proposed LNG export projects that would use gas from the United States, primarily from the Permian Basin.

The first phase of Sempra’s Energía Costa Azul (ECA) liquefied natural gas project in Baja California is under construction, with a capacity of 3.25 million tonnes/year (mmty) and is expected to be on-line in 2024.

NGI’s director of strategy and research, Patrick Rau, said the Wahalajara system and other infrastructure could also support the three additional planned projects.

“ECA is already under construction and since the other three are mid-sized projects and not big giants like Sabine Pass and Corpus Cristi, I think they have a much better chance of making a final investment decision,” said Rau. “Maybe not all three of these non-ECA projects, but all three are a possibility.”

CEO Muthu Chezhian of Singapore-based LNG Alliance Ltd Mexico GPI by NGI He believes Sonora in western Mexico could handle 10 to 15 million tons of LNG capacity per year. His company is developing the 7.8mmty Amigo project in the state of Sonora. “But there won’t be a tsunami of projects,” he said. He believes the Panama Canal bypass will give projects on Mexico’s West Coast an advantage of about 80 cents over projects on the US Gulf Coast.

Sarah Bairstow, COO of Mexico Pacific Ltd. LLC Mexico GPI by NGI that she believed the first two moves of her project would be sanctioned immediately. She saw the project, which is also planned for Sonora, and will deliver gas to Asian markets with a combined liquefaction capacity of 14.1 million tonnes by 2026. She estimated there would be room for 40 million Mexican LNG projects supplying gas to Asian markets.

Leave a Comment