Hurricane Grace path through Mexico puts Texas gas exports, hub prices in peril

2021-09-01by admin

  With Hurricane Grace targeting central Mexico’s Gulf Coast for Aug. 20 landfall, the storm now threatens to pummel power demand there, potentially pushing back on gas exports from South Texas.

  By early morning Aug. 19, Grace is expected to bring tropical storm force winds to the Yucatán Peninsula, later entering the Gulf of Mexico and strengthening ahead of its second blow to the Mexican coastline, the US National Hurricane Center said in its latest tropical update.Midday Aug. 18, the storm was expected to strike Mexico’s mainland as a hurricane, likely bringing strong winds, heavy rain and flooding to the country’s central Gulf Coast.

  In its wake, power outages in eastern Mexico this coming weekend could dampen regional gas-fired power burns, possibly cutting imports on key supply lines like the Sur de Texas–Tuxpan Pipeline.

  During the 2020 Atlantic hurricane season, category 1 Hurricane Hanna–similar in size to Grace–made landfall along the South Texas-Mexico border on July 25 with extensive power outages, flooding and damage reported across the border region the following day.

  In Mexico’s northeast, the storm was likely responsible for a 500-600 MMcf/d decline in gas imports from South Texas. The Sur de Texas Pipeline was among the hardest hit with import volumes dropping about 300 MMcf/d over a three-day period, S&P Global Platts Analytics data shows.

  South Texas exports, pricesIn August, pipeline exports from South Texas to Mexico have averaged about 4.3 Bcf/d–just below the prior record-high monthly average at nearly 4.9 Bcf/d in September 2020.

  Despite strong export demand and buoyant cash markets in the South Texas market, basis prices there are down compared with year-ago levels. Month to date, spot basis at Texas Eastern STX and Tennessee Zone 0 is down about 2 cents and 4 cents, respectively. NGPL STX has seen the largest basis drop, falling 21 cents compared to last August, S&P Global Platts data shows.

  The drop in basis prices has accompanied an onslaught of new supply now being delivered from the Permian Basin on the 2 Bcf/d Whistler Permian, which recently entered service July 1.

  Given the additional gas supply now being delivered to South Texas, any push back on pipeline exports to Mexico could result in a rapid drop in basis prices across the region.

  At Texas Eastern STX and Tennessee Zone 0, balance-of-month basis was trading flat to current spot averages at market settlement Aug. 17. AT NGP STX, the balance-August contract settled down about 4 cents from it’s month-to-date average, S&P Global Platts’ mostly recently published M2MS data shows.