Different for NGLs - Permian Natural Gas Processing Plants and NGL Pipelines, Part 2

The utilization of NGL takeaway pipelines out of the fast-growing Permian is determined to a significant degree by the natural gas processing plants that the pipes are connected to. Midstream companies prescient — or lucky — enough to own NGL pipelines that extend out of the hottest, most productive sub-regions within the Permian’s Midland and Delaware basins are benefiting not only from higher NGL volumes now, but the likelihood of even fuller pipes as Permian production continues to ramp up. Today we continue our blog series on the NGL side of the Permian phenomenon with a look at existing gas processing plants in the play and their connections to NGL pipelines that move y-grade to storage and fractionators.

As we said in Part 1, it is primarily the pursuit of crude oil — not natural gas or natural gas liquids (NGLs) — that is driving the frenzy of drilling and investment in the multistacked, hydrocarbon-packed Permian’s Midland and Delaware basins. But the oil-focused wells being drilled and completed there also are producing large volumes of associated gas, most of it liquids-rich, wet gas loaded with NGLs that — once processed, delivered and fractionated into purity products like ethane, propane, butanes and pentanes+ — add considerable monetary value of their own. The Permian already is producing 2.3 million barrels a day (MMb/d) of crude oil, 6.5 billion cubic feet per day (Bcf/d) of dry natural gas and nearly 800 Mb/d of NGLs. Under RBN’s Growth Scenario, crude production is expected to rise to 3.7 MMb/d (~60%) by 2022, while gas output is seen rising to 12 Bcf/d (~90%). NGL production is projected to increase 75% over the next five years, to ~1.4 MMb/d.

That pace of growth will depend on several things, chief among them being growth-supportive crude oil prices, sufficient gas processing capacity in the right locations and enough oil, gas and NGL pipeline capacity out of the Permian. We looked at crude production and infrastructure in the first part of our “With A Permian Well, They Cried More, More, More” Drill Down Report, and at the natural gas side in the second part. In this blog series, we are focusing on NGLs, which are separated out of the associated gas stream at gas processing plants, then transported out of the Permian as mixed NGLs (also known as y-grade or raw make) mostly in dedicated NGL pipelines, with much of the volume destined for the NGL storage and fractionation hub in Mont Belvieu, TX, just east of Houston. The combined capacity of all the NGL pipelines out of the Permian totals about 1.7 MMb/d, which would seem to suggest the play has far more takeaway capacity than it could possibly use. But some of that takeaway is taken up by NGLs flowing down from the Rockies in the Mid-America Pipeline (MAPL) and some is used by NGL barrels received downstream of the Permian, between West Texas and the Gulf Coast. According to our analysis, the effective takeaway capacity for Permian-sourced NGLs (as of August 2017) is really closer to only 1.1 MMb/d (see Part 1 of the blog series for details) — still more than enough to deal with current production and expected production over the next couple of years, but not enough to serve the region over the longer term.

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