gas takeaway capacity

There are two primary drivers for consuming more natural gas close to where it emerges from production wells. One is to eliminate routine gas flaring, which is wasteful and environmentally detrimental, and the other — especially true in takeaway-constrained plays like the Permian — is to add value to gas that otherwise would be sold downstream at steeply discounted prices. In today’s RBN blog, we discuss some innovative approaches to maximizing gas value by consuming it “in-basin” — and the potential for a lot more gas to be used in West Texas and southeastern New Mexico.

Permian producers continue to walk a tightrope, almost perfectly balanced between still-rising production of natural gas and the availability of gas pipeline takeaway capacity to transport that gas to market. Don’t get us wrong. There are gas takeaway constraints out of the Permian, as evidenced by a Waha cash basis that averaged more than 50 cents/MMBtu last week. But a combination of factors — including increased flows to Mexico and a couple of small, under-the-radar expansions of existing takeaway pipes — has prevented the Waha basis from tumbling to $1 or even $2/MMBtu. But that big fall may still happen — in fact, you could say that odds are that severe takeaway constraints and differential blowouts will occur within the next few months. If and when that happens, what can producers do to quickly regain their balance? Today, we discuss recent developments in Permian gas markets and the options that producers, gas processors and midstream companies may need to consider if things get really tight.

Permian natural gas production increased by about 10% in the winter of 2017-18, from about 7.1 Bcf/d to 7.8 Bcf/d, but all spring it’s remained relatively flat, never averaging more than an even 8 Bcf/d. There’s good reason for that. While at first glance it might seem as if there’s enough pipeline takeaway capacity out of the Permian to accommodate considerably more production growth, the big pipes from the Waha Hub to Mexico are transporting far less than they’re capable of because of delays in developing new pipes and gas-fired power plants on the Mexican side of the border. And pipes from the Permian to California are running less than full, in part because of that state’s hard tilt to renewable power. That’s left the Permian with a takeaway conundrum that may not be fully solvable — at least for a time — until new, greenfield pipeline capacity from West Texas to the Gulf Coast comes online in 15 to 18 months. Today, we discuss the options that producers, gas processors and midstream companies may need to consider if things get really tight.