RBN Energy: possible fixes to the Permian gas takeaway constraints.
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. See more below -- scroll down.From Bloomberg: biggest US oil patch near its limits.
- pipelines will reach limit by this fall -- Pioneer
- lack of capacity to curb growth in Texas shale-oil region
- the Permian will have to shut wells within four months
- the bottleneck is worsening
- now loading crude oil on trucks and driving hundreds of miles
- the Permian is growing at almost 1 million bopd annually
- production currently stands at 3.3 million bopd
- total pipeline capacity is 3.6 million bbls
- bottleneck won't ease for at least a year
- US crude oil production, March, 2018: 10.5 million bbls
- US crude oil production, March, 2018: up 1.4 million bbls from a year ago
For more on the RBN Energy story regarding the natural gas takeaway problem in the Permian:
There are a handful of ways that the effective takeaway capacity out of the Permian could be increased within the next few months.
One possibility — outside the control of folks on the U.S. side of the Rio Grande — would be the completion of Mexican gas pipeline and power plant projects that would boost gas demand south of the border and allow gas flows on existing southbound pipes out of the Permian to increase.
Other possibilities would be adding capacity to an existing gas pipeline out of the Permian; bringing back into service an idled pipeline (or pipelines) between the Permian and a destination market; or repurposing an existing and operating pipeline to transport natural gas instead of crude, NGLs or refined products. We’ve already seen examples of this. Enterprise Products Partners and Energy Transfer Partners in early May (2018) announced the formation of a 50/50 joint venture to resume service on the Old Ocean Pipeline, a 24-inch-diameter pipe between Ellis County, TX (southwest of Dallas-Fort Worth), and Sweeny, TX (just down the Gulf Coast from Houston) within the next few weeks, and increase the capacity of the North Texas Pipeline from the Permian to the upstream end of Old Ocean by the fourth quarter of this year. (By our estimate, this will add about 150 MMcf/d of effective takeaway capacity out of the basin — not a huge amount, but certainly a help.) There’s an outside chance we will see another near-term effort (or two) to increase effective takeaway capacity — surely, every midstream company out there has been considering every possibility the past few months.
There are more ways to reduce the amount of Permian gas that needs to be transported out of the basin — some less onerous and/or less costly to producers than others. We’ll tackle these in some depth one by one, beginning with the one that would probably attract the most public and regulatory attention: gas flaring. We’ve discussed gas flaring several times in the RBN blogosphere, but always about the Bakken — the crude-focused shale play in western North Dakota that was notoriously short on gas pipeline takeaway capacity as crude production ramped up a few years ago.