Open seasons, FIDs promise runway for Permian gas production to late 2020s

Permian Basin production growth is looking more sustainable through the late 2020s following a recent final investment decision on the greenfield Matterhorn Express natural gas pipeline from Waha to Katy.

With a lineup of firm transportation agreements from committed shippers, the 2.5 Bcf/d project will move forward with construction and an expected in-service date of third-quarter 2024, according to a May 19 press release from the developer consortium WhiteWater, EnLink Midstream, Devon Energy and MPLX.

The new 490-mile, 42-inch pipeline will source Permian gas from numerous upstream locations, with a planned 75-mile lateral to include direct connections to gas processing facilities in the Midland Basin.

The Matterhorn Express will also offer shippers a direct connection to the 3.2 Bcf/d Agua Blanca Pipeline, a joint venture between WhiteWater and MPLX, that sources upstream production from across the Delaware Basin for delivery to the Waha Hub.

The FID announcement on Matterhorn Express comes amid a flurry of other recent project announcements from midstream developers in the Permian looking to make brownfield expansions to existing pipelines. Collectively, the previously announced brownfield projects offer a combined 1.7 Bcf/d in additional long-haul transportation capacity from the Permian Basin.

On May 16, Kinder Morgan was the most recent to declare the start of an open season for a 570 MMcf/d expansion of its 2 Bcf/d Gulf Coast Express Pipeline, which will run through June 6. The open season came just days after the developer wrapped up an earlier open season for a 650 MMcf/d expansion on its 2.1 Bcf/d Permian Highway Pipeline. Separately, developer MPLX announced earlier this month an outright FID on its own 500 MMcf/d brownfield expansion of the 2 Bcf/d Whistler Pipeline.

Midstream capacity

For Permian Basin producers, the total newly announced capacity of 4.2 Bcf/d could allow gas production to rise to 22.5-23 Bcf/d, which according to forecasts from S&P Global Commodity Insights, is not likely until late 2027 or even sometime in 2028.

The expanded midstream capacity for gas is allowing Permian oil producers to breathe a sigh of relief, at least for now. In recent years, midstream companies in West Texas have been more proactive in developing crude and liquids pipelines, leaving many producers concerned over the outlook for associated gas output, especially as ESG concerns make gas flaring -- even temporarily -- an increasingly frowned-upon option.

Following startup of the ExxonMobil-led Wink-to-Webster Pipeline system, capable of moving nearly 1.5 million b/d into the East Texas market, Permian crude pipeline capacity now exceeds 7 million b/d. Next month, Permian crude production is expected to hit a record-high 5.2 million b/d, according to recent data published by the US Energy Information Administration.

Assuming no additional crude transport pipelines are added, Permian oil production could grow comfortably until the mid-2020s, and potentially beyond, current projections from S&P Global show.