Different for NGLs - New Pipeline Capacity to Keep Pace with Permian Production Growth

The widely held expectation that Permian NGL production will rise sharply through the early 2020s has set off fierce competition among midstream companies to develop new pipeline capacity out of the play — mostly to the NGL storage and fractionation hub in Mont Belvieu, TX, but also to Corpus Christi. Only some of the incremental pipeline takeaway capacity being planned is likely to be needed, though, raising the stakes among midstreamers to line up the long-term commitments they need to finance and build their projects. Today we continue our series on NGL-related infrastructure in the U.S.’s hottest shale play with a look at efforts to add new takeaway capacity as NGL production in the Permian ramps up.

As we’ve seen time and again during the Shale Era, one of the biggest challenges posed by rapid production growth is developing the pipeline infrastructure needed to transport crude oil, natural gas and natural gas liquids (NGLs) to downstream markets. Exploration and production companies (E&Ps) in the Permian perhaps have been luckier than their counterparts in other shale plays because unlike, say, the Marcellus in northeastern Pennsylvania or the Bakken in western North Dakota, the Permian already had been a major production area for decades when shale production started ramping up in 2015-16 and therefore had substantial takeaway infrastructure already in place. But with Permian NGL production already at 800 Mb/d and expected to rise to 1.4 MMb/d by 2022 (under RBN’s Growth Scenario), the day is fast approaching when new pipeline capacity out of the play will be required.

As we said in Part 1 of this series, the Permian is a crude oil-focused play, but oil wells there also produce large volumes of associated natural gas and NGLs. We also explained that while existing NGL pipelines out of the Permian have a combined capacity of 1.7 MMb/d — twice the play’s current production volume — a significant portion of that capacity (about 600 Mb/d) is either (1) used to transport Rockies-sourced NGLs that flow through the Permian on the Mid-America Pipeline (MAPL), or (2) used to receive NGLs that flow in from plays between the Permian and the Texas Gulf Coast (mostly the Eagle Ford and the Barnett Shale). That leaves only about 1.1 MMb/d of effective NGL takeaway capacity for Permian production, or enough to meet current needs plus maybe a year or two of production growth. In Part 2, we summarized the natural gas processing capacity currently available in the Permian: 103 gas processing facilities with a combined capacity of 11.3 Bcf/d (9.0 Bcf/d of it in West Texas and 2.3 Bcf/d in southeastern New Mexico). In that blog and in Part 3, Part 4 and Part 5, we discussed in detail the eight existing NGL pipelines out of the play, including their estimated flows.

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