Hold On ... I’m Comin’ – Producers, Midstreamers Preparing for Rising Tide of Permian-Sourced NGLs

Even if Permian crude oil production were to stagnate over the next few years — a big if — the region’s output of NGLs would likely increase by half, from the current 3.2 MMcf/d to about 4.8 MMcf/d in 2030. NGL shippers, all too aware of the double-barrel impacts of the Permian’s rising gas-to-oil ratios (GORs) and rising gallons of NGLs per Mcf of gas, have been supporting the development of new pipeline capacity from West Texas to the Gulf Coast, most recently evidenced by the plan to expand the throughput of the Bahia NGL Pipeline to a cool 1 MMb/d. In today’s RBN blog, we’ll discuss the ongoing buildout of NGL pipeline capacity out of the nation’s largest NGL production area.

As we said a few months ago in Don’t Worry, Be Happy, the stresses on crude-oil-focused drilling in the Permian — especially the ramp-up in OPEC+ production and the slump in WTI prices — have led at least some NGL folks to wonder what a leveling off (or an outright decline) in Permian crude production would mean for the volumes of mixed NGLs (Y-grade) being piped to fractionation hubs. We noted that while U.S. oil production has increased by more than 160% since 2008 and natural gas output has nearly doubled, the volume of Y-grade produced at gas processing plants has quadrupled, from 1.8 MMb/d 17 years ago to 7.3 MMb/d today.

The Permian accounts for more than 40% of that NGL total because oil-focused drilling in West Texas and southeastern New Mexico generates vast amounts of NGL-saturated associated gas. And this is all-important: Over the past 10-plus years, the Permian’s GOR has increased from about 3.4:1 to 4.2:1, and the gallons of NGLs per Mcf of gas has risen from about 4.5 to 5.2. This trend toward gassier, more NGL-packed production continues, and we’ve calculated that — if you assume the basin’s average GOR continues to increase by 4% annually and that its average GPM rises by 4.5% a year — the Permian’s NGL output is almost sure to keep climbing even under the bleakest crude oil production scenario.

More specifically, continued gradual growth in Permian oil production (to nearly 8 MMb/d in 2030) would lead to 5.8 MMb/d of NGL output in 2030 (up 2.6 MMb/d from current levels), flat oil production (as we said in the intro to today’s blog) would boost NGL production to about 4.8 MMb/d that year, and even a 5%/year decline in oil production would leave the Permian’s NGL output about 500 Mb/d higher than it was in 2025. (In other words, at about 3.7 MMb/d.)

With that near certainty of a significant increase in Permian NGL volumes, Y-grade shippers of all stripes (producers, marketers, fractionators, etc.) have been supporting the development of new NGL pipeline capacity from West Texas to fractionation centers along the Texas coast. This rising tide of NGLs also has been attracting new entrants to this space.

The most recent example is ExxonMobil’s November 20 announcement that it had reached an agreement to acquire a 40% undivided interest in Enterprise Products Partners’ new 550-mile, 600-Mb/d Bahia NGL Pipeline from West Texas’s Ector County to the Mont Belvieu fractionation hub east of Houston (green line in Figure 1 below). The Bahia Pipeline is just beginning commercial service. As part of the ExxonMobil/Enterprise deal, which is expected to close in the next few weeks, Bahia’s capacity will be increased by 400 Mb/d by Q4 2027 and ExxonMobil will build a 92-mile pipeline connection (dashed red-and-black line) — to be known as the Cowboy Connector — between its Cowboy Central Delivery Point (CDP; yellow star) in southeastern Eddy County, NM, and Bahia’s current origination point. Enterprise will serve as operator of the combined Cowboy/Bahia system.