Still the One - Permian Gas Output Remains High; Processing Capacity Being Added

Natural gas production volumes in the Permian Basin are very near the all-time record of 6.9 Bcf/d set last September, and crude oil and gas producers alike see nothing but blue skies for the highly prolific West Texas/Southeast New Mexico play. The Permian already has a lot of gas processing capacity, but a good bit of it is older, and parts of the region—especially the super-hot Delaware Basin—need more of the big, efficient cryogenic plants that can process 100 to 200 MMcf/d. Today, we continue our review of gas production and processing in the biggest U.S. gas-producing region that is not named Marcellus.

The past two years have been a challenging time for crude oil and natural gas producers in most of the U.S., but much less so for exploration and production companies in the 75,000-square-mile Permian Basin. In rock ‘n’ roll terms, the Permian is a lot like Bruce Springsteen––it’s been a consistent producer (of both gas and oil) for decades, and it has more respect today than ever. (You might even call the Permian “The Boss” of hydrocarbon output.) Thanks to favorable production economics and multiple pay zones, output levels in the Permian dipped only slightly as oil and gas prices tumbled, and have since rebounded. As we said in Part 1 of our series, crude oil has always been the big draw for Permian producers, but most of the wells there also produce large volumes of liquids-rich or “wet” natural gas that needs to be processed to extract natural gas liquids (NGLs). In its latest Drilling Productivity Report, the Energy Information Administration (EIA) projected that the Permian would produce an average of nearly 6.9 Bcf/d in October (2016), only 30 MMcf/d less than it did at its peak a year ago. Gas production in the Eagle Ford in South Texas, meanwhile, is projected to fall below 5.6 Bcf/d in October—a 25% drop from its all-time  high in February 2015. (Of course, Appalachia, with the prolific Marcellus and Utica plays, still reigns supreme as far as gas is concerned, with almost 25 Bcf/d now being produced in the region based on RBN production numbers).

NEW Backstage Pass Drill Down Report

With a Permian Well, They Cried More, More, More Part 3 – Permian NGLs: Plants and Pipelines

Permian NGL production is on a tear, doubling over the past four years to 800 Mb/d, with the possibility of almost doubling again by 2022.  With that much supply growth, pipeline takeaway capacity is an obvious concern. But this is the Permian, where big-league NGL volumes are nothing new. A lot of legacy infrastructure has been in place for decades, and a couple of new pipeline projects came on line just last year. So there appears to be ample takeaway capacity to serve the region. But appearances can be deceiving.    Not all of the pipeline capacity exiting the Permian can be used by Permian producers, and there are a number of factors – such as the looming end of Permian ethane rejection – that will accelerate the need for more capacity sooner rather than later.   Fortunately for Permian NGL producers, several pipeline expansion projects are in the works.   But exactly how many pipelines, and how soon they will be needed remain open questions.  This Drill Down report addresses these questions and many others. 

Click Here for More Information on Part 3 of our Permian Drill Down Report Series

There is nothing new about the need for most of Permian gas to be processed to extract NGLs (for more on this, see How Rich is Rich), and while the region has scores of gas processing plants (some nearly as old as Bruce himself!), more capacity is needed in the fastest-growing parts of the play, especially the Delaware Basin, which runs from Eddy and Lea counties in southeastern New Mexico down through Culberson, Loving, Reeves, Ward, and Pecos counties in West Texas. In Part 1, we noted that in the first half of 2016, several new gas processing plants came online in the Permian, including Enterprise Products Partners’ 200 MMcf/d South Eddy plant in Eddy County; EnLink Midstream’s 100-MMcf/d Riptide plant in Martin County, TX (in the Midland Basin); MarkWest Energy Partners’ 200-MMcf/d Hidalgo plant in Culbertson County; EagleClaw Midstream’s 60-MMcf/d Toyah I plant in Reeves County; Western Gas Partners’ 200-MMcf/d Ramsey IV plant in Reeves County; and Crestwood Midstream’s expansion of its Willow Lake plant in Eddy County to 50 MMcf/d.

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