Keep It Comin' Love – Permian Crude Leads Growth, But Will Gas Processing Capacity Keep Up?

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.

Few things have kept us more on our toes in the past year than the rapid development of the Permian, from barreling production growth to the frenzied midstream M&A and expansion activity in the basin as midstreamers scramble to keep pace with the fast-rising need for associated-gas processing. We’ve kept a close watch on Permian gas infrastructure expansions, rounding up the latest project completions and announcements at every turn, most recently in More, More, More and Keep This Party Going. But with a fresh production forecast in hand, we can now tally it all up and take a closer look at how processing capacity stacks up, particularly in the context of our latest production estimates — something we track weekly in our Crude Oil Permian and NATGAS Permian reports.

We start with what’s driving the Permian infrastructure frenzy — production. Crude oil remains in the driver’s seat when it comes to hydrocarbon drilling, especially in the Permian as the biggest producer of U.S. crude. Unlike in other crude-focused basins, crude oil output in the Permian has not only bounced back from COVID-related setbacks but has surpassed pre-pandemic levels. After sliding to about 4 MMb/d in May 2020 and briefly dipping to as low as 3.7 MMb/d during the Deep Freeze of February 2021, crude production in the basin was sitting at a record of about 5.3 MMb/d in August. Despite capital restraint by producers, the Permian was almost single-handedly responsible for driving U.S. crude production back up to 12 MMb/d in recent months after flailing around 10-11 MMb/d for much of 2020-21.

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