Keep It Comin' Love, Part 3 - Outlook for Permian Gross Gas Production vs. Processing Capacity

Permian crude oil production has climbed ~30% since the lows of 2020 to about 5.2 MMb/d this summer and helped keep crude oil — and gasoline — prices in check as market balances tightened. With that has come a lot of gross gas, which surged by over 40% to 21.3 Bcf/d on average this summer, up from the 2020 low of just under 15 Bcf/d. If unconstrained by infrastructure, RBN expects that to grow another 30%, or more than 6 Bcf/d, in the next three years, but only if there is adequate midstream capacity — everything from gathering lines to processing plants and, ultimately, gas and liquids transportation lines to deliver the products to consuming markets on the Gulf Coast. While there’s been a significant midstream build-out over the past two years, and more expansions are in the works, there are major outstanding questions about whether it will get built in time and in the right places to prevent prolonged bottlenecks.  In today’s RBN blog, we continue our series focusing this time on upcoming expansions and how total processing capacity stacks up against RBN’s Mid-Case production outlook over the next several years.

When it comes to U.S. crude oil plays, no basin has been more resilient than the Permian post-2020, and by extension, no basin has played a bigger role in taming oil prices — and regional natural gas prices — in recent months. While crude production in most other oil-focused basins is flat-to-lower on average since 2020, Permian crude output has climbed 15% in that time, from about 4.5 MMb/d in 2020 to just over 5.1 MMb/d this year to date, with much of that growth occurring in the past year or so. You could say Permian crude saved the day — at least for a time. However, that growth could not have happened without a significant build-out of natural gas midstream infrastructure. And a lot more of it will be needed if Permian crude production is to continue growing and keep U.S. crude oil prices in check. In today’s RBN blog, we provide an update on gas processing capacity in the Permian.

Permian producers are churning out ever-increasing volumes of associated gas, all of which needs to find a home. New or expanded takeaway pipelines to Gulf Coast markets are an obvious option — and a few projects are in the works — but locking in capacity requires long-term commitments that many producers are loathe to make. As a result, the balance between Permian takeaway capacity and the volumes of gas that need to exit the basin is always on a knife’s edge, often resulting in a Waha basis so ugly that producers are essentially giving their gas away. But what if there was a way to put more Permian gas to good, economic use within the basin, and ideally very close to where it’s produced? Better yet, what if the producers could garner some environmental cred in the process? In today’s RBN blog, we discuss a trio of Permian projects — a couple of them involving top-tier E&Ps — that would use local gas to make gasoline, sustainable aviation fuel (SAF) and electricity.