With Permian production of natural gas liquids (NGLs) on the rise and available pipeline capacity shrinking, midstream companies are in advanced stages of developing projects that — if built on their current schedules — would roughly double the 1.2-MMb/d of effective NGL takeaway capacity in place today within the next 18 months or so. Much of the planned capacity is backed by long-term commitments from Permian producers anticipating continued growth in production of crude and NGL-rich associated gas, especially in the play’s Delaware Basin. Still, the pace of NGL pipeline projects in the Permian begs the question, is all that incremental capacity needed? Today, we continue our series on the NGL takeaway challenges facing producers and processors in cowboy country.
As we said in Part 1, Permian NGL production (including ethane that is rejected into natural gas) has increased from about 800 Mb/d last September to about 1 MMb/d now — a 25% gain in only eight months, and RBN’s Mid-Curve Forecast Scenario (based on crude and gas prices similar to current forward curves) projects that Permian NGL output will grow to more than 1.1 MMb/d by the end of 2018, 1.3 MMb/d a year later and 1.6 MMb/d by the early 2020s.
The Permian already had a substantial amount of NGL pipeline capacity in place before the region’s production of crude oil and associated gas took off, and more has been added since. But a number of the NGL pipes out of the Permian also move barrels from other basins, either inbound flows from the Rockies or volumes added downstream of the Permian in the Eagle Ford and Barnett shales. In addition, the vast majority of the Permian’s incremental NGL production is occurring in the Delaware, which had only a limited number of pipes and suddenly needs more. And then there’s the ethane rejection factor. About 100 Mb/d of the ethane emerging from Permian wells with other NGLs is currently being rejected into natural gas (see Ethane Asylum Revisited for more on ethane rejection), but in 2019 ethane rejection could fall to minimum operational levels (i.e., as close to zero as possible within hardware limits) due to increasing demand from new, ethane-consuming steam crackers coming online along the Gulf Coast (see Whole Lotta Ethane Rejection Goin’ On) — and from the ethane export market. The effective end of material ethane rejection in the Permian will boost the total NGL volumes that need to flow out of the play (mostly to the NGL fractionation and storage hub in Mont Belvieu, TX), putting additional pressure on pipeline takeaway capacity between the Permian and the Gulf Coast.