Solitude, Encore Edition – New Natural Gas Pipeline to Overwhelm the Permian Basin with Outbound Capacity

Key to understanding the impact of Solitude is the context, as it will be hardly solitary in providing a new outlet for Permian egress. Between the ultra-negative Waha prices of 2026 and the opening of the first Solitude line in 2029, five projects will have been completed, adding a whopping 11.3 Bcf/d to outbound capacity from the Permian. These projects have been described by Novi Labs/RBN before, most recently in Fly Like an Eagle, but to recap: the Gulf Coast Express expansion (0.57 Bcf/d, dark-blue line) is already flowing more gas to the Agua Dulce Hub in South Texas, and Hugh Brinson (green line) is starting to ramp up flows to Northeast Texas — it will eventually have a capacity of 2.2 Bcf/d. Blackcomb (dashed light-blue line) is set to enter service later this year, providing an extra 2.5 Bcf/d of takeaway to Agua Dulce. Then follows a nearly two-year pause before Eiger Express comes online, with a terminal capacity of 3.7 Bcf/d flowing to the Katy Hub. Finally, Energy Transfer’s Desert Southwest expansion (dashed dark-red line) will increase capacity headed westbound to Arizona by 2.3 Bcf/d about the same time Solitude enters service.

That is a lot of extra capacity, which raises the question of how much Permian gas will be available and whether that available gas will fill all the incremental capacity. To answer these questions, we turn to our Arrow Model report, which is published every month (most recently on August 13). The Arrow Model divides most of Texas and all of Louisiana into 11 different regions; we then create supply-and-demand assumptions for each one. The pipelines between the regions are grouped into Arrows, and each Arrow has multiple tranches of capacity that simulate the way rates affect the flow of natural gas on the pipelines from one region to another. So, by plugging in our supply-and-demand assumptions and the pipeline capacities, Arrow tells us how gas is expected to flow (and what basis prices incentivize that flow).

The Arrow region called West TX & NM coincides with the Permian production basin. In our monthly Arrow Model report, we model it using our mid-case production scenario, which assumes a long-run Henry Hub natural gas price of $4.25/MMBtu and a long-term WTI price of $70/bbl. For the Permian specifically, the oil price is far more relevant to gas production than the gas price — months of punishingly negative gas prices at Waha have proven that producers are willing to lose significant money on gas as long as they can produce profitable crude. Our production forecast has Permian production expanding by 11.2 Bcf/d between 2026 and 2036 – eerily similar to the 11.3 Bcf/d of pre-Solitude capacity expansion referred to above. We expect the rate of growth to be strongest over the next few years, with production growing at an average of 6% annually in the 2027-29 period, then slowing to less than 3% per year from 2033 onward.

This growth is strong enough that our latest report predicted a new pipeline would need to be added out of the Permian to forestall another bout of extreme negative pricing. Based on where demand needs would be most acute in the 2030s, a pipeline to Gulf Coast TX — the Arrow region that includes Katy — was the most obvious choice. However, we predicted the line would not be needed until 2033 and would require only 2 Bcf/d of capacity to stave off constraints in the Permian. Solitude is more than twice the size and would come online around three years earlier, and these differences lead to big changes in flows. Simply put, it seems very likely that not enough gas will be available to fill each outbound pipeline, leaving some pipes partially empty.

The impact of Solitude is most vividly illustrated by the graphs in Figure 2 below, adapted from our Arrow Model report. The seven graphs show the seven Arrows bringing natural gas out of the Permian. The red line in each chart shows the average annual gas outflow (in MMcf/d) for the version of Arrow with Solitude added. The blue line, where visible, shows annual flows where we instead had the 2-Bcf/d pipeline in Arrow D starting in 2033. The most dramatic impact is shown in Arrow C, with flowing gas to the Northeast TX region, which includes Dallas/Fort Worth and the Texas side of the Haynesville Shale. As this is a production region in its own right, the price premium is weaker than in other eastern regions, so in the scenario with Solitude, flows plummet to 0.6 Bcf/d in 2031 and stay below 1 Bcf/d in 2032, recovering later in the 2030s as Permian production gradually increases. This Arrow includes legacy systems Atmos and North Texas Pipeline, which would be more greatly impacted by the decline because of tariff structures. But Hugh Brinson is the dominant pipe in this Arrow, and it has 2.2 Bcf/d of capacity in these years. Our forecasts show that the majority of Hugh Brinson’s capacity will go unused in 2031-32 as a result of Solitude creating a Permian capacity glut.

Moving clockwise, Arrow D to Gulf Coast TX, which includes metro Houston, is the only Arrow that moves higher under the Solitude scenario. Yet that higher move comes nowhere near the 4.5-Bcf/d capacity add. Instead, it totals 2.5 Bcf/d higher in 2031 and 2.8 Bcf/d higher in 2032. So, Solitude flows are coming at the expense of other pipelines, most notably the old legacy systems like Kinder Morgan Texas and Oasis, but also eating into volumes on the post-2020 buildout.

In Arrow E to the Corpus TX/Agua Dulce region, all the pipelines are under a decade old, and the region is adjacent to expanding LNG terminals. Nevertheless, flows here are 0.8 Bcf/d lower from 2031-34 as a result of the new Solitude volumes. Flows from the Permian to Southwest TX are also impacted, albeit to a lesser extent. For Arrow G to Mexico and Arrow A to the west (Arizona and California), gas is headed to a higher-priced region with no obvious competing supply, so the flow forecast is the same in both scenarios. However, the flow forecasts on Arrow A and G assume an expansion of gas-for-power capacity in Arizona and Mexico, respectively. There is some risk that the power-sector expansion will not occur as planned to boost flows on those two Arrows. Finally, Arrow B to the MidCon is going to a lower-priced region and we expect flows on that Arrow to contract in both scenarios.

The Permian gas industry has long adopted a just-in-time philosophy to building new outflow pipelines, so building a new line on a schedule that seems likely to leave some capacity unused is a bit of a head-scratcher. The answer might lie in the posse WhiteWater has gathered to build this particular pipeline, which is more producer-heavy than in the past. This group includes Diamondback Energy, which has been uniquely forthright about the effect that gas prices have had on its oil production. We reported back in May that Diamondback’s Q1 earnings call included a discussion of how fiercely negative Waha prices caused the E&P to shut in a small amount of oil production for purely economic reasons. The firm described how when Waha outright prices are below minus $3/MMBtu, the differential erodes a well’s NGL uplift, and below minus $4/MMBtu it starts eating into the oil value. Below a certain level of negative prices, gas shifts from an annoyance to a mortal threat to some oil wells. As seen in Figure 3 below, Waha cash prices (blue line) dipped below the minus $4/MMBtu barrier (red line) several times in 2024-25, but in March-May of this year the price was below that level the majority of the time, severely curtailing the amount of oil that producers without sufficient gas capacity could bring to market.

The Permian is the country’s leading crude oil basin, and as oil production increases and gets “gassier,” gas production seems sure to follow. The question is not if, but when the Permian adds another 11.3 Bcf/d of gas production. In this context, it makes sense for producers and midstreamers to get ahead of capacity constraints and avoid the punishing market that has bedeviled producers without sufficient capacity over the past year.