As winter approaches it may be only a matter of time before the gas market bears run out of fundamentals pointing in their favor, but right now offshore gas production shut-ins are falling steadily, Texas production is on the rise, and the warm weather and downward price pressure continues.
The Minerals Management Service (MMS) said Monday that offshore production shut-ins fell about 274 MMcf/d since last Thursday to 3,742.03 MMcf/d on Monday morning. About 727,054 bbl/d of oil remains shut in. A total of 66 companies report 162 platforms and five rigs evacuated. Cumulative gas production shut-ins total 442.1 Bcf.
Shut-ins are down from a post-hurricane Rita peak of 8.6 Bcf/d, and with the expected return of Enterprise Products’ Toca gas processing plant to service next week, at least another 0.3-.04 Bcf/d will return to service.
The older Toca 1 processing train, which has processing capacity of 280 MMcf/d, was restored to operation on Oct. 23, and Enterprise expects to have the Toca 2 processing train back in operation next week if all goes well. The two facilities combined are expected to have a post-storm capability of 600 MMcf/d. The total capacity of Toca is 1.1 Bcf/d. Pipelines served by the plant include Southern Natural Gas, Viosca Knoll Gathering System and Mississippi Canyon Gas Pipeline (see related story).
Meanwhile, Bentek Energy reports that Gulf Coast and offshore Texas production is actually up about nearly 700 MMcf/d compared to where it was on Aug. 26 prior to Hurricanes Katrina and Rita. As of Monday morning, gas nominations on major Gulf Coast Texas interstate pipelines totaled 4,294 MMcf/d compared to 3,613 MMcf/d on Aug. 26.
Bentek’s data regarding onshore and offshore Louisiana production varies slightly from the MMS statistics. Bentek reports Louisiana production down about 3,573 MMcf/d from Aug. 26 levels to about 6,634 MMcf/d. The largest amount of shut-in production remains upstream of Tennessee Gas Pipeline — 1,405 MMcf/d, according to Bentek. Other large amounts are upstream of Mississippi Canyon (511 MMcf/d), Southern Natural (383), Transco (363), Sea Robin (209), Texas Eastern (236) and Columbia Gulf (107).
Energy consultant Stephen Smith of Stephen Smith & Associates said Monday that he’s expecting shut-ins to remain above 2 Bcf/d through December. However, he’s also expecting gas storage levels to be nearly 230 Bcf above 10-year norms on Dec. 30. Working gas in storage currently totals 3,229 Bcf, or 123 Bcf more than the five-year average and most analysts predict this week’s storage report from the Energy Information Administration will show another net weekly injection. Smith said he’s expecting a very large 51 Bcf net injection, which would compare to a “normal seasonal draw” of 28 Bcf. He predicts that January gas futures will fall as much as $1.50-2.00 before expiring next month.
Natural gas cash prices fell sharply last week. NGI’s National Average of spot prices crashed $1.17 in one week to $7.51. Henry Hub cash fell to $9.23 on Friday from $10.85 a week earlier. However, near month futures showed a net gain of about 30 cents to end the week at $11.712.
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