You probably won’t be surprised to hear that we believe the Permian Basin is set for another year of crude oil and natural gas production growth. Everyone’s come to expect that from the Permian. What is new, though, is that the vast production area in West Texas and southeastern New Mexico has taken on some serious global significance over the past year — especially as an increasingly important energy supplier to Europe. That emerging role is likely not only to support continued production growth in the Permian but also to shape how the basin’s infrastructure is built out through the rest of the 2020s. And we also know that infrastructure development is critical to the Permian’s ongoing success — in 2023, new gas pipeline takeaway capacity is needed pronto and it may not be long before new oil-pipeline capacity from the Permian to Corpus Christi is required too. In today's RBN blog, we provide this year’s outlook for Permian natural gas and oil markets.
NATGAS Billboard is a daily, early morning email and report that provides an up-to-the-minute view of the natural gas market outlook, including storage injections/withdrawals and price. Billboard’s models incorporate pipeline flow data, weather models, electricity demand data and more.
This is our fourth annual Permian Outlook blog — we released our first in January 2020, back when only a handful of folks had read about the novel coronavirus. There wasn’t a whole lot we got right in that 2020 Permian Outlook, but it’s doubtful we are alone in that regard. After 2020’s negative crude oil prices and widespread production curtailments, 2021 saw things in the basin begin to return to normalcy, though the pandemic continued. In our 2021 Permian Outlook, we forecasted solid natural gas and oil production growth, as well as expanded natural gas infrastructure, with the start of the 2-Bcf/d Whistler Pipeline. That new pipeline capacity led to the strongest Waha basis in the Permian gas market in quite some time. Heading into last year, our 2022 Permian Outlook foresaw continued growth for Permian gas and oil production as well as a weakening Waha basis — that came to fruition and then some. Last year also marked the first year since the pandemic began that Permian oil production grew appreciably above its pre-pandemic high, with about 600 Mb/d of new field production added during 2022. Despite the production growth, however, crude oil price differentials in the Permian moved very little due to excess capacity out of the basin, which was also consistent with our view at the start of the year.
Which brings us to this year’s outlook. We’ll start with natural gas, where our view is much as it has been: plenty of growth. When it comes to Waha absolute prices and basis — the difference between Henry Hub and Waha — things could get ugly, but we’ll get to that in a minute. After growing from 14 Bcf/d at the start of 2022 to over 16 Bcf/d by the end of the year (solid purple line in Figure 1), we see Permian gas volumes continuing to move higher during 2023. The dashed purple line shows our current forecast: By the end of this year, we see Permian dry gas volumes topping 17.25 Bcf/d, or about 1 Bcf/d higher than where we forecasted it at this time last year (dashed gray line).
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About the song
“I’ve Come To Expect It From You” was written by Buddy Cannon and Dean Dillon. It appears as the third song on George Strait’s 10th studio album, Livin’ It Up. Released as the third and final single from the album in October 1990, it went to #1 on the Billboard Hot Country Songs Singles chart. The lyrics are about an ex-lover’s apathetic attitude. Personnel on the record were: George Strait (lead vocals), Reggie Young (electric guitar), Steve Gibson (acoustic guitar), Joe Chemay (bass), Eddie Bayers (drums), Paul Franklin (steel guitar, dobro), Floyd Domino (piano), Johnny Gimble (fiddle), Jim Horn (saxophone), and Curtis Young, Liana Young (backing vocals).
Livin’ It Up was recorded in February 1990 at Emerald Studio in Nashville with Jimmy Bowen and George Strait producing. Released in May 1990, the album went to #1 on the Billboard Top Country Albums chart and #35 on the Billboard 200 Albums chart. It has been certified Platinum by the Recording Industry Association of America.
George Strait is an American country music singer, songwriter, actor, and record producer. Many consider Strait the “King of Country Music.” He has sold more than 120 million records worldwide and has 13 multi-Platinum, 33 Platinum, and 38 Gold albums. He started his musical journey playing in a rock-and-roll cover band during his high school years in Pearsall, TX. He started singing country music in an Army-sponsored country band while stationed in Hawaii. After his stint in the Army, Strait enrolled as a student at Texas State University in San Marcos, where he formed the Ace in the Hole Band. After releasing some music on an independent Texas label, he signed his first record deal with MCA Records in Nashville in 1981. He has released 29 studio albums, three live albums, 12 compilation albums, one soundtrack album, and 102 singles. He has appeared in three motion pictures and one television show. He holds the record for most ACM and CMA Awards and is third only to Elvis Presley and The Beatles for the most Gold and Platinum albums. He was inducted into the Country Music Hall of Fame in 2006. Strait has retired from touring, giving the final concert on his The Cowboy Rides Away Tour in Arlington, TX, in June 2014. He still occasionally records and is scheduled to appear at six stadium shows with Chris Stapleton in the summer of 2023.
Comments
Do you believe Permian production can grow prior to Whistler coming online? (And by grow, I mean come out of ground and get into storage, pipe, or local demand and therefore balances - not into a flare).
In reply to Gas production growth by Jennifer Lee
There is some room in storage and power demand increases as prices fall. Mexico exports will also increase heading into summer. That said, constraints on production may occur if Line 2000 doesn’t return and the intrastate pipeline maintenance continues.