OMG - The Build-Out of Permian Gas Processing Capacity Isn't Over, Not by a Long Shot

Continued growth in Permian crude oil production can’t happen without sufficient infrastructure — not just takeaway capacity for crude, natural gas and NGLs but also the capacity to process the fast-increasing volumes of associated gas being produced in the Midland and Delaware basins. The incremental need for processing capacity is enormous, as evidenced by the ongoing, almost frenetic build-out of gas processing plants across the Permian. More than 1 Bcf/d of new capacity is slated to come online by the end of this year, with another 1.9 Bcf/d in the first half of 2024 and another 1.8 Bcf/d after that. In today’s RBN blog, we discuss the race to add processing plants in key locations in West Texas and southeastern New Mexico and the drivers behind it. 

Over the past six years, crude oil and natural gas production in the Permian has nearly tripled — yes, tripled! According to RBN’s Crude Oil Permian and NATGAS Permian reports, production in the 70,000-square-mile basin is now averaging an astonishing 6.1 MMb/d (for crude) and 17.1 Bcf/d (for gas), and our forecast suggests those numbers will continue rising at a brisk pace over the next six years as Permian E&Ps become even more efficient and overseas demand for hydrocarbons remains strong. Production growth in the Permian depends on infrastructure — it’s as simple as that — and throughout the basin’s rebirth during the Shale Era midstream companies have been working hand in hand with producers and others to ensure that the gathering systems, gas processing plants, takeaway pipelines and other infrastructure needed are developed.

It would be tempting to say that the Permian is good-to-go on crude oil takeaway capacity — after all, as we discussed in I Want to Take You Higher, the 1.45-MMb/d Wink-to-Webster (W2W) pipeline from West Texas to the Houston area has ramped up to full capacity, giving the Permian more than enough total pipeline space to the Gulf Coast (and the crude oil hub in Cushing, OK). The catch is, pipelines to export terminals in the Corpus Christi area — especially Enbridge Ingleside Energy Center (EIEC) and South Texas Gateway (STG), which together account for nearly 40% of total export volumes — have been running full, spurring Enbridge to plan an open season for a 200-Mb/d expansion on its 68%-owned Gray Oak Pipeline and EPIC Midstream to consider an expansion on its EPIC Crude Pipeline. (For the latest on U.S. crude oil exports, check our weekly Crude Voyager report.)