A big question mark hanging over the Permian like a dark cloud is whether there will be sufficient pipeline takeaway capacity to deal with continued production growth in the U.S.’s hottest shale play. Mostly, takeaway-adequacy questions are asked about either crude oil or natural gas, but ensuring sufficient NGL pipeline capacity out of the Permian may ultimately be the biggest challenge of all. Why? Because just about everything involving NGLs seems to be more complicated — how they are produced, transported, stored and even priced. Today we begin a series on Permian natural gas processing, natural gas liquids production growth and existing plus planned NGL pipelines out of West Texas and southeastern New Mexico.
It is primarily the pursuit of crude oil, not natural gas or natural gas liquids (NGLs), that is driving the frenzy of drilling activity and investment in the multistacked, hydrocarbon-packed Permian’s Midland and Delaware basins. But while crude may be driving the Permian bus, oil-focused wells in the 70,000-square-mile region 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. Permian production numbers (both current and projected) are noteworthy. The region already is producing 2.3 million barrels a day (MMb/d) of crude oil and 6.3 billion cubic feet per day (Bcf/d) of dry natural gas, and under RBN’s Growth Scenario, those numbers are expected to rise to 3.7 MMb/d and 12 Bcf/d, respectively, by 2022. The growth outlook for Permian NGLs is similar. Nearly 800 Mb/d are being produced now, and five years from now the region’s NGL output could top 1.4 MMb/d, a prospective increase of nearly 80%.
When crude oil emerges from the well it is part of a mix that also includes dissolved natural gas, NGLs and water, as well as a number of impurities. All of that needs to be sorted and separated. As a first step, the mix is typically run through a heater/treater unit to separate out the crude (see Don’t Leave Me This Way), leaving a natural gas/NGL mix that is then sent by gathering pipeline to a natural gas processing plant. There, the mix is supercooled to separate the natural gas (mostly methane) from the NGLs. Depending on economics and other factors, some ethane (the lightest NGL) may be rejected — that is, not extracted, but instead left in the natural gas and sold as part of the gas stream (see Ethane Asylum Revisited and You Ain’t Seen Nethane Yet). The processed natural gas is fed directly to the gas pipeline (or pipelines) connected to the processing plant, and the mixed NGLs (also known as y-grade or raw make) are usually fed to a nearby NGL pipeline, but sometimes move by rail or truck. That may sound simple, but it is not, particularly for NGLs.