Permian natural gas begins flowing into Mexico via new pipeline
Heavily discounted Permian Basin gas could soon access downstream markets in Mexico, following the recent startup of incremental gas deliveries to Fermaca's Wahalajara pipeline system.This flow could help Permian Basin producers increase oil production and avoid having to flare the natural gas from the wells. It looks like a win-win deal for Texas producers and for Mexico.
On Monday, updated electronic bulletin board flow data showed that a new downstream segment on Wahalajara, the El Encino - La Laguna pipeline, began receiving about 40 MMcf/d on April 17.
In Tuesday trading, cash prices at Waha traded as high at 65 cents/MMBtu, up about 25 cents from weekend flow dates. Forwards prices for May jumped 32 cents on the day, rising to a $2.47/MMBtu discount to benchmark Henry Hub gas on the improving outlook for Permian supply.
The startup of incremental demand on Wahalajara bodes well for Permian producers since all of the system's supply comes entirely from the West Texas play.
Over the past month, about 185 MMcf/d of Permian gas production has flowed westbound on Roadrunner Gas Transmission Pipeline where it meets the border-crossing Tarahumara Pipeline -- Wahalajara's northern-most segment.
After flowing southbound on Tarahumara, an interconnection to El Encino - La Laguna offers access to additional demand in north-central Mexico, and to uncompleted Wahalajara segments and interconnections farther downstream.