Permian production may have plateaued over the past few months — the shale play’s crude oil output has bounced between 6 MMb/d and 6.3 MMb/d for almost a year now, and natural gas production has hovered around 18 Bcf/d for about as long. But producer-backed plans to continue adding gas processing capacity in the Permian’s Delaware and Midland basins strongly suggest that E&Ps in West Texas and southeastern New Mexico see a lot more production growth “up around the bend.” As we discuss in today’s RBN blog, midstream companies haven’t tapped the brakes on their plans for new gas processing capacity in the Permian — in fact, they’ve been keeping the pedal to the metal.
Warning! Today’s blog is, in part, a subliminal advertorial for RBN’s upcoming School of Energy which will highlight the interlinkages of commodity markets. The conference will be held on June 26-27 in Houston at the Houstonian.
A few days ago, in All My Rowdy Friends Have Settled Down, we discussed why Permian oil and gas production growth has been on hiatus lately. Among other things, we cited capital discipline by E&Ps, acreage consolidation and optimization, and gas takeaway constraints, the last of which producers have been dealing with (in part) by reducing their drilling activity and shifting to areas with lower gas-to-oil ratios (GORs). In that same blog, however, we noted that despite the current plateauing of Permian production, midstreamers continue to design and build new gas processing capacity, virtually all of it backed by producer commitments. That suggests that E&Ps and integrated production/refining giants like ExxonMobil and Chevron expect to ramp up their production of Permian crude oil and associated gas over the next year or two.
Figure 1. New Permian Gas Processing Capacity, 2023-26. Source: RBN
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