Waha basis

Permian producers are churning out ever-increasing volumes of associated gas, all of which needs to find a home. New or expanded takeaway pipelines to Gulf Coast markets are an obvious option — and a few projects are in the works — but locking in capacity requires long-term commitments that many producers are loathe to make. As a result, the balance between Permian takeaway capacity and the volumes of gas that need to exit the basin is always on a knife’s edge, often resulting in a Waha basis so ugly that producers are essentially giving their gas away. But what if there was a way to put more Permian gas to good, economic use within the basin, and ideally very close to where it’s produced? Better yet, what if the producers could garner some environmental cred in the process? In today’s RBN blog, we discuss a trio of Permian projects — a couple of them involving top-tier E&Ps — that would use local gas to make gasoline, sustainable aviation fuel (SAF) and electricity.

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.