North American gas midstream sector prepares for consequential earnings season
Houston — The start of first-quarter earnings reporting season will give the market a glimpse into how extensive has been the impact of the coronavirus pandemic on operators of pipelines, processing facilities, gathering systems and liquefaction terminals.
A collapse in global crude prices due to severely weakened demand amid widespread stay-at-home orders may result in associated gas production slowing and perhaps even falling. S&P Global Platts Analytics has lowered its full-year forecast for Permian Basin gas production by nearly 0.2 Bcf/d from the level expected in March. The 2021 forecast was reduced by 1.4 Bcf/d to an average of 13.9 Bcf/d.
As crude prices have continued to decline over the past month, further downside risk to associated gas production is apparent. Production cuts can affect pipeline volumes and the timing of expansion projects. That, in turn, can affect the amount of gas available to feed LNG export terminals. Those dynamics can be complicated if liquefaction facilities cut output as end-users defer or scrap cargoes. With that as a backdrop, the summer outlook could be dim.
What happens when European storage reaches its maximum capacity in the summer?” Alex Dewar, a senior manager at Boston Consulting Group’s Center for Energy Impact, said in an interview Friday. “That is likely to be the trigger for more cancellations. US terminals will likely bear the brunt of that.”
Kinder Morgan, which moves more than a third of the gas consumed in the US and operates the Elba Liquefaction facility in Georgia, will report its latest financial results on Wednesday, followed by Enterprise Products Partners on April 29, Columbia Gas Transmission operator TC Energy on May 1, Transcontinental Gas Pipe Line operator Williams on May 4 and Rover gas pipeline operator Energy Transfer on May 11. Cheniere Energy, the biggest US LNG exporter, reports earnings April 30.
Kinder Morgan’s El Paso Natural Gas Pipeline network will have increased access to Northwest Mexico demand markets as Kinder Morgan’s subsidiary Sierrita Gas Pipeline officially placed an expansion project into commercial service on April 12.
Capacity on the Sierrita Pipeline increased from 200 MMcf/d to 627 MMcf/d and may help feed pent-up demand in the state of Sonora, according to Platts Analytics. The Sierrita Pipeline expansion could help serve future demand like a proposed LNG export terminal near the city Puerto Libertad.
In Texas, Kinder Morgan has a significant – and growing – footprint of gas pipeline assets around the Permian Basin.
