Even with slightly more than 7 Bcf/d of shut-in supplies in the Gulf of Mexico (GOM) Tuesday and three named tropical storms in the Atlantic, the spot gas market felt enough relief from the impact of Hurricane Gustav apparently being less than what had been feared to allow prices to fall by mostly sizeable amounts at nearly all points.
The downturn was especially severe in the Rockies, where quotes averaged less than a dollar except at Cheyenne Hub, which was buoyed by its greater ability to access Midwestern markets. An outage of a downstream segment of Rockies Express (REX), which starts Wednesday and lasts through Sept. 26, will back up an estimated 500-800 MMcf/d into the region for most of this month (see Daily GPI, Aug. 19). During this work deliveries to ANR Brown and Panhandle Eastern Audrain will be unavailable. All other delivery points will be available, REX said.
Just hours before the scheduled hydrostatic testing was due to begin, FERC denied an injunction requested by three producers that was aimed at delaying the REX work by 60-90 days (see related story).
Overall losses ranged from about a nickel to $4.10 or so. Some eastern points joined the Rockies in recording triple-digit declines. The bottom-line quotes of the day were 45 cents at Opal Plant and into Northwest-domestic.
Florida Gas Zone 3 and the Florida citygate were the only two locations to record gains, about a dime and nearly 30 cents, respectively, as Florida Gas Transmission kept an Overage Alert Day that had first been implemented Aug. 21 in place through at least Tuesday.
Tuesday’s cash market also had a bit of negative guidance from the previous Friday’s 10.7-cent decline by October futures. It will have a lot more bearish news to digest Wednesday after the contract plunged another 68.2 cents Tuesday (see related story).
Despite the current price pain in his region, one Rockies producer said he had found “a silver lining that no one seems to recognize yet.” Because REX is not yet operating at its maximum allowable pressure, it has been moving only 1.25 Bcf/d of its 1.5 Bcf/d of capacity into Missouri (Panhandle Eastern Audrain), he noted. “Once this hydrostatic testing is completed and any needed repairs are made,” REX should be able to move 250 MMcf/d more than before, he said.
In addition, the producer continued, when REX gets into Ohio early next year, its capacity will be 1.6 Bcf/d. “At this point Kinder Morgan is still staying that the next leg into Clarington, OH, is expected to be completed in the summer of 2009, giving REX a total capacity of 1.8 Bcf/d. So compared to right now, the Rockies stand to get a boost in takeaway capacity of 550 MMcf/d by the middle of next year. If production growth in the Rockies starts to moderate, we ‘might squeak by’ without another basis blowout in 2009.”
At first glance it appeared that GOM infrastructure escaped relatively unscathed from the winds and heavy seas of Hurricane Gustav, which came ashore Monday morning near Cocodrie, LA. Operators of platforms, drilling rigs and offshore pipelines were making their initial assessments Tuesday, and there were some indications that crews would be returning to some facilities as early as Tuesday afternoon and that shut-in volumes could start ramping back up that night (see related story).
On Tuesday afternoon Tropical Depression Gustav was suppressing air conditioning demand in the western end of the South where it was dumping heavy rains on the Ark-La-Tex area where the state borders of Arkansas, Louisiana and Texas come together. The storm’s path to the west-northwest was expected to eventually turn northward into Arkansas and eastern Oklahoma.
Tropical Storm Hanna reached hurricane status during the holiday weekend but had reverted to a tropical storm by the time it reached the southern end of the Bahamas Tuesday morning. Although an abrupt (and unexpected) turn to the west in the next day or two could take Hanna between the Florida Keys and Cuba into the GOM, the more likely impact for the gas market is demand destruction along the East Coast. The National Hurricane Center expected the storm to move northwestward through the Bahamas to just off the northeast Florida coast before jogging to the north and making landfall in South Carolina a bit northeast of the border with Georgia. From there Hanna was believed likely to stay onshore through the Mid-Atlantic states into the Northeast.
Tropical Storm Ike, although much more remote than Hanna, was looking like the more credible threat eventually to GOM interests. Its almost due-west projected track would have it approaching the northeast coast of Cuba around Sunday morning. Tropical Storm Josephine, southwest of the Cape Verde Islands, was still very much a wild card in the hurricane season game.
Transco, Tennessee and Southern reported having lost more than 1.7 Bcf/d, about 1.5 Bcf/d and about 960 MMcf/d, respectively. Transco spokesman Chris Stockton said the company was expecting to see some production come back on-line Tuesday with even more returning Wednesday.
“Tennessee is not experiencing any significant operational impact” despite the shut-ins, said a bulletin board posting. Because the Pecan Island separation facility was undamaged and in the process of coming back on-line, Tennessee said it was allowing nearly three dozen upstream meters to resume flow “upon receipt of a confirmed nomination.” And Southern said that while its supply loss remained fairly steady Tuesday, “line inventory remains at adequate levels and pressures remain steady across our market area.”
One source commented that the pace of restoring shut-in offshore production likely will be most dependent on how quickly processing plant outages along the Louisiana coast, many of which were spurred by mandatory evacuations, can be resolved.
Generally cooling load is much like it was in late August — definitely less than what one would expect in one of the hottest periods of the year. Even the desert Southwest isn’t as hot as usual, with El Paso declaring a location-specific Strained Operating Condition due to high linepack resulting from takes in the Phoenix area not matching what was scheduled (see Transportation Notes).
The National Weather Service’s (NWS) six- to 10-day forecast for the Sept. 8-12 workweek calls for below-normal temperatures in most of the central U.S. The area in question covers all of Texas at the south end and rises on the west from Texas’ westernmost tip through the western ends of New Mexico, Colorado Wyoming and Montana. The area’s eastern side spreads through northeast Louisiana into the central section of the Southeast and on through the western side of the Northeast into upstate New York. NWS predicts above-normal readings in most of Florida (except the western end of the Panhandle) along with the southern halves of Georgia and South Carolina and the southeastern corner of North Carolina. Above-normal temperatures are also in the forecast for the three West Coast states and Nevada along with southwest Idaho, southwest Utah and all but the eastern edge of Arizona.
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