Published: August 6, 2024 |

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Permian Basin natural gas producers hoping for a boost from opening of the Matterhorn Express pipeline will have to wait a bit longer.

East Daley Analytics had expected the 2.5-billion cubic feet per day line to begin seeing volumes in July, ramping up to full capacity by September. But a revised construction schedule from the contractor building the project has pushed the timing back to October.

“It keeps Waha lower for longer, at least a couple of more months,” said Rob Wilson, senior director at East Daley, referring to the natural gas header in Reeves County that has seen natural gas prices go negative numerous times since spring.

“It does change the timing. I expect Waha to trade as it has been. April was bad, May was worse with maintenance on the Gulf Coast Express. The price will stay low until October,” Wilson told the Reporter-Telegram by telephone.

Wilson said the change in timing for the Matterhorn came from an update by the contactor, Gulf Companies. The contractor updated a list of projects and posted a fourth quarter 2024 completion target for Matterhorn. That language has since been removed from the contractor’s website, he noted.

“The big story is when Matterhorn comes online, that will bring a big slug of supply to South Texas,” said Wilson, continuing the trend of Permian flows saturating the South Texas market.

Pipeline capacity from the Permian to South Texas will surge to 12 billion cubic feet per day when Matterhorn enters service, up threefold from capacity of just 3.4 Bcf in early 2019. Wilson said the surge in Permian supply will put downward pressure on Houston Ship Channel basis. Additional flows from the Permian are expected to displace inbound supply from Carthage.

His company forecasts natural gas flows from Carthage to Houston by 2 to 3 Bcf per day from 2024 to 2028 to balance the market, indicating Houston will trade at a discount to Henry Hub.

Once the Matterhorn enters service, “from a production standpoint we expect it to grow substantially in the fourth quarter,” said Wilson, noting that some operators are already planning to increase output at that time.

For all the additional capacity Matterhorn will provide, Wilson expects the relief will be short-lived.

“We think egress will tighten again in the second half of 2026. Matterhorn will alleviate constraints between now and then,” said Wilson.

Source: Midland Reporter-Telegram

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