There is no doubt that the epicenter of U.S. associated natural gas production growth is the Permian, where dry gas output has increased from 3.5 Bcf/d in 2012 to more than 6.5 Bcf/d today. And there is a lot more where that came from. RBN’s Growth Scenario indicates that as much as 12 Bcf/d of natural gas production could be surging out of the Permian by 2022, with less than 1 Bcf/d of that needed for local demand. All of that incremental production will need to move out of the region, either on existing or new pipelines. Permian gas is such a big deal that RBN has developed a brand new weekly report focused specifically on the topic — how much is produced, where it is processed, its destination markets, how it is priced and, most importantly, how the Permian gas market will balance out, both today and in the coming months. Today we take you on a tour of RBN’s NATGAS Permian report five days before we close our inaugural report preview period — it’s your last chance! If it is not obvious, today’s blog is a blatant advertorial for our new report.
All things Permian — crude oil, associated natural gas, natural gas liquids (NGLs), takeaway capacity, etc. — have been an important focus of the RBN blogosphere for the past couple of years. And it is very likely that the Permian will continue to draw special attention — it’s that big a deal. In recent months we’ve issued two Drill Down Reports on the play, With a Permian Well They Cried More, More, More, Part 1 and Part 2, the first focusing on crude oil production growth and takeaway capacity and the second on natural gas. We’ve also looked at the challenges faced by Permian producers as they quickly ramp up production (see Don’t Leave Me This Way and Wipe Out!); at the increasing volume of Permian crude being exported out of Corpus Christi (see Take It to the Limit); at new gas pipeline hubs being developed to help move Permian gas to Mexico and other markets (see Rio and It Was Good Living With You (W)aha, Part 4); and at the potential for constraints on NGL takeaway out of the Permian (see Different for NGLs).
While the Permian may be the hottest drilling location in the U.S. — if not North America and possibly the world — trying to decipher natural gas dynamics in the basin is far from straightforward. For starters, the area is huge, stretching across 70,000 square miles from east of Midland to near the Mexican border and over dozens of counties that most traders, analysts and developers have never heard of. The scale of natural gas infrastructure is daunting, with legacy gathering and processing systems built on top of each other over the past 60-plus years only complicated by recent new projects and a wave of others to be added over the next two years. The interstate pipeline system in the area most resembles a spaghetti bowl that might be untangled more quickly if not for the presence of the Texas intrastate pipelines, those denizens of the analyst world that are allowed to post no data at all and make up almost half of the Permian’s gas takeaway infrastructure. Throw on top of this situation the buildout of export pipelines to Mexico, where data sources are harder to come by and almost always in Spanish, and you may find yourself searching for the Advil or your favorite tequila.