News Release

Permian Continues to Test the Limits of America’s Existing Midstream and Downstream Infrastructure

byAdam Baca

Austin, TX (August 7, 2019) – Drillinginfo, the leading energy SaaS and data analytics company, has released Permian to Gulf Coast Midstream, the latest installment of their FundamentalEdge series, which presents an overview of oil, gas, and natural gas liquids (NGL) infrastructure currently proposed between the Permian basin and Gulf Coast export terminal locations.

Underscoring the lack of adequate takeaway capacity in 2018-2019, plus the expected importance of coastal oil, natural gas, and NGL exports, in this report Drillinginfo highlights the expected impact of upcoming long-haul takeaway capacity projects and the price differentials they’ll create.

“The Permian basin has experienced unprecedented production growth and remains the world’s focus, from producer to private equity, to service and supply companies,” said Bernadette Johnson, Vice President of Strategic Analytics at Drillinginfo. “But the Permian continues to be challenged by existing pipeline constraints and the inability to efficiently and effectively move oil, natural gas, and NGLs to the market. All hydrocarbons are tied at the drill bit and one affects the other. Although many players in the Permian are targeting crude oil primarily, natural gas processing and pipeline bottlenecks can have a negative impact on that crude oil production. However, a light at the end of the tunnel may soon be visible – at least for those that can hang in there through 2020,” said Johnson.

In Permian to Gulf Coast Midstream, Drillinginfo analyzes numerous planned pipeline projects and the bottlenecks they expect will be cleared providing relief to America’s most prolific, but congested basin.

Key Takeaways from the Report:

  • Production growth in the Permian basin is testing the limits of existing midstream and downstream infrastructure, requiring further capital investment in long-haul pipelines, gas processing plants, NGL fractionators, and coastal export terminals.
    • Crude oil production continues to rise in the Permian basin despite economic headwinds resulting from sub-$60/bbl WTI prices. Nevertheless, the pace of growth is at risk of slowing significantly if the low flat-price environment persists. With additional long-haul pipeline capacity coming online in the second half of 2019, noncommitted shippers will likely find themselves squeezed out as spot arbs shut. As volumes are further increased to the Gulf Coast (and away from Cushing), additional export capacity will be required, and there is an acute need for new export facilities capable of fully loading VLCCs. A race to the finish has begun, with numerous onshore and at least seven offshore terminals currently proposed or in development.
    • Although natural gas production is mostly a by-product of drilling for crude in the Permian basin, flaring is just not a long-term option. In DI’s high case scenario, dry gas production could increase by 50% (~5 Bcf/d) over the next five years.
    • Market participants are also facing weak regional pricing, with Waha basis trading at levels more than $1.00/MMBtu under Henry Hub. Hence, at least five projects are currently proposed to alleviate this constraint. All projects will be transporting the gas east toward South Texas and Louisiana to feed LNG exports as well as growing power and industrial demand.
    • NGL production out of the Permian is expected to continue to grow, with most of the production destined for the Gulf Coast. To allow for the extra production, a number of pipeline projects are under construction or in planning to transport the NGLs. As NGLs arrive at the Gulf Coast, they are then fractionated. Fractionation capacity has been running tight since mid-2018, resulting in numerous fractionation projects along the coast. The fractionation bottleneck was relieved slightly in early 2019, when two projects hit the market. However, with most projects scheduled to come online in early 2020 and after, it is possible the bottleneck will reappear in late 2019 and early 2020.

Download the Preview and Charts

Members of the media can download a shortened preview of the overall 20-page Permian to Gulf Midstream or contact Jon Haubert to schedule an interview with one of Drillinginfo’s expert market analysts.

Picture of Adam Baca

Adam Baca

Related News

Breaking news alert on the impact on oil prices due to Israel attacking Iran
Analyst Takes Blog Topics
ByAl Salazar, Enverus Intelligence® Research (EIR) Contributor

In response to today's announcement that EOG Resources would acquire Encino Acquisition Partners for $5.6 billion, Andrew Dittmar, principal analyst at Enverus Intelligence® Research provided this commentary explaining the deal's significance.

Europe’s battery boom: 13 times more capacity by 2028 faces grid, regulatory roadblocks
News Release
ByEnverus

Enverus Intelligence® Research has released a market overview of the opportunities and challenges related to developing battery projects in Europe.

Vanishing renewable energy credits: US tax incentives may not be so critical
News Release
ByEnverus

Enverus Intelligence® Research has released a new report evaluating successful renewable energy development amid today’s federal policy uncertainty in the U.S.

Viper Strikes Rare Mineral Merger with $4.1 billion Sitio Buy
Analyst Takes Blog Topics
ByAndrew Dittmar

In response to today's announcement that EOG Resources would acquire Encino Acquisition Partners for $5.6 billion, Andrew Dittmar, principal analyst at Enverus Intelligence® Research provided this commentary explaining the deal's significance.

EOG makes its M&A move, bets big on the Utica in $5.6B deal
Analyst Takes Blog Topics
ByAndrew Dittmar

In response to today's announcement that EOG Resources would acquire Encino Acquisition Partners for $5.6 billion, Andrew Dittmar, principal analyst at Enverus Intelligence® Research provided this commentary explaining the deal's significance.

Enverus Intelligence® Research Press Release - Class VI applications signal slowdown
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, has published the latest installment in its quarterly report series tracking developments in U.S. carbon capture and sequestration (CCS)...

Enverus successfully concluded its annual EVOLVE Conference, held May 12–15 in Houston, Texas. The company’s flagship customer conference brought together more than 700 leaders, innovators and decision-makers from across the energy value chain to explore the future of energy through the lens of generative artificial intelligence, market transformation and operational excellence.
News Release
ByEnverus

Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, successfully concluded its annual EVOLVE Conference, held May 12–15 in Houston, Texas. The company’s flagship customer conference brought together more than 700 leaders, innovators and decision-makers...

geothermal-energy-in-the-us
News Release
ByEnverus

Enverus Intelligence® Research (EIR) has released a report that analyzes how oil and gas operators can harness existing acreage and drilling expertise to advance geothermal power projects.

Enverus Intelligence® Research Press Release - Recap: How the Trump Administration is reshaping energy markets
News Release
ByEnverus

Enverus Intelligence® Research (EIR), a subsidiary of Enverus, the most trusted energy-dedicated SaaS company that leverages generative AI across its solutions, today announced the release of “How the Trump Administration Is Reshaping Energy Markets.”

Find Out How Enverus Can Help Your Business

Subscribe to the Energy Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Get Started

Register Today

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert