Acadian pipeline system expansion adds 400 MMcf/d in Haynesville takeaway capacity

Highlights

Expansion may be bearish for USGC prices

Capacity likely to fill quickly

31 May 2023 spglobal.com

A newly completed extension of the Acadian natural gas pipeline system will add 400 MMcf/d of capacity from the Haynesville shale to Louisiana LNG export terminals and industrial customers, easing southbound takeaway constraints and potentially weighing on US Gulf Coast prices.

Developer Enterprise Products Partners said May 31 it had completed the extension, which increases the overall capacity of the Acadian system to about 2.5 Bcf/d. The added 400 Mcf/d of southern capacity introduces a needed outlet toward premium demand markets in southern Louisiana and is likely to fill quickly, according to S&P Global Commodity Insights analysts. An uptick in Acadian deliveries to interstate lines, which was about 1.4 Bcf/d on May 31, may materialize in the coming days.

The Acadian project coming online will also likely result in some volumes currently flowing northbound from the Haynesville being redirected south, adding bearish pressure to downstream markets including the US Henry Hub benchmark and long-haul destinations in the US Southeast, according to S&P Global analysts. The incremental flows associated with the extension could lead to increased storage injections and a loosened gas market balance later in the year.

Haynesville production

There has been little change in regional spot prices so far. A dropoff in Henry Hub futures prices since early April has continued with the newly prompt NYMEX Henry Hub July futures contract, which was trading around $2.26/MMBtu May 31, or about 6 cents down from its prior settlement, CME Group data showed. Henry Hub futures for the balance of summer, or the months from July to October, have fallen significantly in recent weeks to trade at an average of about $2.42/MMBtu May 30, down about 22 cents from the end of April, S&P Global data shows.

"At those levels of flow, we do not anticipate prices being too drastically affected," S&P Global natural gas pricing analyst Amilcar Flores said May 31.

Gas production in the Louisiana Haynesville has ramped up substantially in the past year, averaging an estimated 11.2 Bcf/d over the last 30 days, up 1.1 Bcf/d relative to one year ago, having peaked over 11.5 Bcf/d for the first time on numerous occasions earlier in May, S&P Global data shows.

When Enterprise pitched the Acadian expansion project in April 2022, the company cited projections that Haynesville gas production will exceed 18 Bcf/d in the coming years.

Enterprise co-CEO Jim Teague said during an earnings call May 2 that the expansion, which is underpinned by long-term take-or-pay contracts, would be "full on Day 1." The Acadian extension is the first of $3.8 billion of capital projects Enterprise plans to complete and start service on in 2023.

"The expansion of the Acadian Haynesville Extension provides Haynesville producers with incremental natural gas takeaway capacity and provides additional supply to existing and new industrial developments in the Mississippi River Corridor and the growing Louisiana LNG export market," Natalie Gayden, senior vice president of Enterprise's natural gas business, said in the company's May 31 announcement. "Importantly, at a time when it is so challenging to get energy infrastructure projects approved and permitted, this project adds the energy infrastructure necessary to deliver abundant, reliable and affordable natural gas to both domestic and international markets in today's evolving geopolitical landscape."

Feedgas demand

The added capacity also comes as US feedgas demand remains strong despite global LNG prices continuing to soften with tepid demand and high gas storage inventories in Europe and Asia.

Total LNG feedgas demand in the Southeast region, including Texas facilities, averaged about 12.1 Bcf/d in May, down from averaging nearly 13.1 Bcf/d in April, S&P Global data shows. Overall US feedgas demand averaged nearly 13 Bcf/d in May, down from a monthly record average high of nearly 14 Bcf/d in April. Spring maintenance at US LNG terminals tends to be clustered around May and June.

The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $6.55/MMBtu May 31, up 5 cents/MMBtu from the previous assessment but down from $22.85/MMBtu a year ago. Platts is part of S&P Global.