July 31 (Reuters) -

Natural gas prices in the Permian shale basin in West Texas

turned negative a record number of times so far in 2024,

including on Wednesday, as pipeline and other constraints trap

gas in the nation's biggest oil-producing basin.

Spot gas prices for Wednesday at the Waha hub

in West Texas turned negative for a third time

in July even as a

record-breaking heatwave

could boost U.S. power demand to an all-time high later

this week as homes and businesses crank up their air

conditioners.

Analysts say that is a sure sign the region needs more gas

pipes, which has already prompted Kinder Morgan ( KMI ), Energy

Transfer ( ET ) and other U.S. energy firms to propose new

projects.

"The only way for prices to stay in positive territory

is through new pipeline capacity," Chad Bircher, lead

quantitative analyst on North American natural gas at financial

services firm LSEG, told Reuters.

There is, however, only one big gas pipe actually under

construction in the Permian at this time - the Matterhorn

Express Pipeline - which analysts say is on track to enter

service later this year.

"As production in the Permian Basin continues to grow and

demand increases, the Matterhorn Express Pipeline's takeaway

capacity provides much needed transport of natural gas to end

markets," Matterhorn Express Pipeline spokesman Cody McGregor

told Reuters.

In the past, Matterhorn Express projected the 490-mile

(789-kilometer) pipe capable of moving up to 2.5 billion cubic

feet per day (bcfd) of gas from the Permian to the Gulf Coast,

could enter service in the third quarter of 2024, but most

analysts now expect the project to start in the fourth quarter.

Matterhorn Express is a joint venture between units of

WhiteWater, EnLink Midstream ( ENLC ), Devon Energy ( DVN ) and

MPLX ( MPLX ), according to WhiteWater's website.

"The revision to the construction schedule would delay by

several months new natural gas volumes from the Permian and keep

prices under pressure in the basin," analysts at energy

consultant East Daley Analytics said in a note.

The Permian in West Texas and eastern New Mexico is the

nation's biggest and fastest growing oil-producing shale basin.

A lot of gas also comes out of the ground with that oil.

When oil prices are relatively high, like they have

been this year, producers are willing to take a loss on gas

because they can still make money selling oil.

Next-day prices at the Waha averaged below zero 22 times so

far this year. Waha prices first averaged below zero in 2019. It

happened 17 times in 2019, six in 2020 and once in 2023.

There were no negative prices in 2021 or 2022 (at least no

daily averages below zero) because energy firms built new

pipelines, including the Permian Highway and Whistler, to move

more gas out of the Permian.

PROPOSED NEW PIPES

Although several firms have proposed to build new pipes in

the Permian, analysts have said two projects were most advanced

- Kinder Morgan's ( KMI ) 0.57-bcfd Gulf Coast expansion and Energy

Transfer's ( ET ) 1.5-bcfd Warrior.

So far, however, neither firm has committed to build their

project.

Kinder Morgan ( KMI ) told Reuters "We continue to see interest in

the project and are working with potential customers."

Energy Transfer ( ET ) had no comment beyond what they said on past

earnings calls.

"We're not going to run out and FID (final investment

decision) Warrior when we have some capacity on our existing

system," Energy Transfer ( ET ) co-CEO Marshall McCrea told analysts

during the company's first quarter earnings call in May.

McCrea, however, said "There remains ... strong interest in

another pipeline, probably by mid to late 2026. We are very

optimistic that we will build the next pipeline to come out of

West Texas."

Analysts expect Energy Transfer ( ET ) to have more to say about

Warrior when it releases its second quarter earnings on Aug. 7.