A number of Permian pipeline projects that would help alleviate impending takeaway constraints in the fast-growing production region have advanced in recent weeks — a clear sign that producers, shippers and midstream companies alike are paying close attention. But will these projects be enough, particularly when you consider the flood of capital spending in the Permian by exploration and production companies and the accelerated production growth that it may spur? Today, we discuss the progress midstreamers have been making on the Permian takeaway front as production of crude oil, natural gas and natural gas liquids (NGLs) in the play ratchets up.
Production of crude oil and NGL-packed associated gas in the Permian has been rising quickly, putting added pressure on midstream companies to build more pipeline takeaway capacity — and fast. Crude oil output in the 70,000-square-mile play in West Texas and southeastern New Mexico now tops 2.6 MMb/d, while natural gas production is up to 7 Bcf/d and NGL output exceeds 800 Mb/d. And with the price of West Texas Intermediate (WTI) higher than it’s been in more than two years and the breakeven cost for many Permian producers falling, production growth is poised to accelerate. As we discussed recently in Ready to Run, a number of the oil-focused and diversified E&Ps we track have been ramping up their planned 2018 capex in the Permian — examples we noted include ConocoPhillips, Parsley Energy and Occidental Petroleum. Just after we posted that blog, Chevron announced that in 2018 it will invest $3.3 billion in Permian projects, and that it plans to increase its Permian rig count by one-third (to 20 from the current 15) by the end of next year. Previously, ExxonMobil said that in 2018 it plans to add 10 Permian rigs to the 20 already active there.
We’ve paid a lot of attention to Permian-related infrastructure in 2017, not only in blogs but in four Drill Down Reports: on crude takeaway pipelines, gas pipelines, NGL pipelines and (most recently) crude shuttle pipelines and gathering systems within the Permian region. Many existing pipelines out of the region are running at or near their full capacity and additional capacity will be needed to avert even more severe takeaway constraints. The immediate problem is with gas takeaway. That’s because while a number of new gas pipelines have been built from the Waha gas hub in West Texas to the Mexican border, southbound exports from Waha into Mexico remain demand-constrained until downstream pipelines and gas-fired power plants are completed south of the border. And, as we discussed in Witchy Waha, delays in the ramp-up of gas exports to Mexico have resulted in the pipes moving gas east, north and west out of Waha filling up and have increased the negative basis or spread between Waha and Henry Hub gas prices.
To access the remainder of Help on the Way - Will A Wave of Permian Pipeline Projects Avert Takeaway Constraints? you must be logged as a RBN Backstage Pass™ subscriber.
Full access to the RBN Energy blog archive which includes any posting more than 5 days old is available only to RBN Backstage Pass™ subscribers. In addition to blog archive access, RBN Backstage Pass™ resources include Drill-Down Reports, Spotlight Reports, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. If you have already purchased a subscription, be sure you are logged in For additional help or information, contact us at firstname.lastname@example.org or 888-613-8874.