Haynesville Basin’s Quiet Growth

Earlier this week, the U.S. Energy Information Administration issued its short-term energy outlook for October. The outlook for 2020 is that the tremendous growth in natural gas production will slow, but that there will still be an increase in 2020 from 2019’s record.

While most of the focus in recent years has been on the Permian and Marcellus/Utica formations, today we look at an area, the Haynesville/Bossier formation (Haynesville), that has been quietly growing and is creating demand for additional pipeline capacity to reach the Gulf Coast. While the Permian and Marcellus/Utica producers are directing a substantial expansion of pipeline capacity to the Gulf Coast, the Haynesville formation has a major geographic advantage of being closer to the region -- which means that they should be able to move the production to market at a lower cost than the producers in those other regions. Today, we dive into the pending projects on the interstate (sponsored by Boardwalk and Enable) and intrastate (sponsored by Enterprise Products and Gemini Midstream) systems, as well as a few rumors and trial balloons, which are in earlier planning stages.

Tracking Pipeline Capacity Growth from the Haynesville

The Haynesville formation straddles the line between Texas and Louisiana. This will mean that many of the projects designed to take Haynesville production to the Gulf will need to cross a state line and thus become regulated by FERC. There are currently two major projects pending at FERC that provide new capacity totaling over 3 Bcf a day, Boardwalk Pipeline’s Gulf South Index 99 Expansion Project and Enable Midstream Partners’ Gulf Run And Line CP Modification Project.

Index 99 Expansion Project

Gulf South’s Index 99 Expansion Project is anchored by a single shipper that signed a ten-year contract to move 750,000 dth/day of production from the Shelby Trough part of the Haynesville formation to the Henry Hub. Gulf South explained that the production from just that area of the Haynesville was projected to grow by 5 Bcf/day between now and 2040.

The company has requested FERC to issue the certificate by March 2020 so that it can be in service by October 2020. Based on our historical models, both of those dates seem optimistic, but we will know more after FERC issues the environmental report, especially if it can do so by its promised date of November 22.

Gulf Run and Line CP Modification

The bigger of the two interstate projects, for both capacity and the pipeline being added, is the Gulf Run project. However, it is still in the pre-filing phase and so the project’s design has yet to be finalized. As originally proposed, it calls for the construction of 171 miles of natural gas transmission pipeline and two new compressor stations, and was designed to transport 2.8 Bcf/day of natural gas from the heart of the Haynesville in Panola County, Texas and DeSoto, Red River and Bienville Parishes in Louisiana to delivery points near Starks, Louisiana and Gillis, Louisiana. However, in its most recent report to FERC, Enable stated that it has “realigned the scope of the project to better reflect the current market interest.” The details of this revised scope are to be included in the draft resource reports that the company intends to file this month. The company still intends to file its formal application in early 2020.

The original schedule called for the formal application to be filed in November 2019, with a FERC certificate to be issued in January 2021 and an in-service date in the second half of 2022. All of those dates seem optimistic at this point, but our model could change once the application with the final design is filed.

Intrastate Solutions Also Work

While the Haynesville straddles the state border, it is possible to build an intrastate pipeline to provide takeaway capacity if the pipeline stays in either Texas or Louisiana. Enterprise Products Partners L.P. (“Enterprise”) owns the Acadian Gas Pipeline System , which operates solely within the state of Louisiana. Just last month, Enterprise announced plans to expand and extend that system so that it could deliver the growing volumes of natural gas from the Haynesville to the LNG plants in South Louisiana. The project will include the construction of an approximately 80-mile pipeline and have a capacity of approximately 1 Bcf/day. According to Enterprise, the project is supported by long-term customer contracts and is expected to begin service in mid-2021.

On the Texas side of the border, Gemini Midstream Holdings, LLC announced late last year that it was seeking customers for its Gemini Gulf Coast Pipeline, a proposed natural gas pipeline from the heart of the Haynesville in Panola County, Texas to the Beaumont area in Orange County, Texas, that would provide 1.5 Bcf/day of capacity from Haynesville to premium markets along the Texas and Louisiana Gulf Coast. This project seems to be moving forward, as a company named Gemini Gulf Coast Pipeline began acquiring pipeline easements in Panola County, Texas beginning in July of this year. Based on our analysis of the timing of easement acquisitions for other similar projects in Texas, this may mean the company is planning for an in-service date about 21 months after it began those acquisitions, which would put the in-service date around April of 2021.

Rumors and Trial Balloons

Whenever there is a growing demand for additional pipeline capacity, there are bound to be projects that are rumored and those that are proposed but never built. Haynesville appears to have some of these as well.

One of the largest exploration and production companies in the basin is Indigo Natural Resources LLC and it shares a management team with a midstream company, Momentum Midstream, LLC. Momentum operates a gas processing facility that is capable of treating and compressing roughly 1 Bcf/day of gas, and has built around 350 miles of large-diameter, high-pressure pipeline. There is speculation that the two companies intend to build a pipeline within Louisiana to take that gas all the way to the Gulf Coast markets, but we have not been able to confirm those rumors just yet.

On the trial balloon front, Enterprise included in a presentation to analysts earlier this spring a reference to a new pipeline named Lumberjack that was to be a Texas-based companion to the Louisiana-based Acadian system and take Haynesville gas to the Texas Gulf Coast. The project has not appeared in any of its presentations since that time, so it may not have had much market support. But then again, we have seen dormant projects come back to life, so it is something to watch for.