Demand for oil is driving a surge in Texas oil pipeline construction, and infrastructure builders are hoping gas exports will soon provide an incentive to add more gas pipelines.

Midstream companies have been eager to help get booming liquids production to markets, especially since crude oil takeaway bottlenecks out of West Texas and New Mexico appeared in spring 2018, earlier than expected. That slew of project announcements is now stoking worries about a potential overbuild, but Enterprise Products Partners LP CEO Jim Teague said the potential value proposition is too good for many pipeline builders to pass up.

"When you're looking at what's going on in the Permian ... you're looking at a pipeline and you're sitting there with a $15 [per barrel] spread, you can afford to throw money at it and you can afford ... cost overruns because the opportunity's so huge," he said during a panel at CERAWeek by IHS Markit.

Part of the attraction of constructing new pipelines is the rapid increase in U.S. crude exports. Eight proposed projects are vying to load some of the world's largest oil carriers on the Gulf Coast after Congress decided at the end of 2015 to lift a multidecade ban on crude exports.

For now, midstream operators are struggling to keep up with demand for human capital. "Trying to find [an oilfield] truck driver in the Permian is pretty difficult," Teague said. "We're paying some special stipends to our [Permian staff] just to keep them."

Housing is also an issue. "Try to find a house in Midland," Teague said, noting that Enterprise is bringing people in from outside of Texas and sometimes setting them up in "man camps" of less-than-permanent housing.

Along with the booming oil output, natural gas production is also growing in the basin, but takeaway capacity has not been keeping up. The latest estimates from the U.S. Energy Information Administration show the Permian exceeding 14 Bcf/d in April, with little to no space on existing pipelines to carry it.

"Gas is not what's driving the economic value of the Permian. It's oil," said Matt Schatzman, president and CEO of Houston-based LNG terminal developer NextDecade Corp. "That's 90 to 95% of the value proposition … the rate of gas market development has not kept pace with associated gas in this great oil play."

Still, more gas pipeline capacity is being built in the Permian and should begin to come online later this year. Executives from both the upstream and midstream segments said during a CERAWeek panel observed that hoped-for gas demand increases had not materialized. They are hoping for LNG exports to provide a much-needed outlet for the region's glut.

"The next pipeline must be linked to LNG," said Cynthia Walker, Occidental Petroleum Corp.'s senior vice president of marketing and midstream. With demand for U.S. LNG picking up and prices for domestic gas fetching materially higher prices in both Europe and Asia than locally, Permian producers see opportunity. LNG facility owners do as well.

"LNG demand increased so substantially that it went from long LNG to getting very tight for 2019, 2020, 2021," said Michael Smith, CEO of Freeport LNG Development LP.

The demand in Europe for U.S. LNG, Schatzman said, has exceeded initial expectations, while LNG markets in Asia — particularly in China — continue to grow. But the U.S.'s LNG exporters are not positioned to sell all the gas produced in the Permian. Schatzman said that the roughly 4 Bcf/d of LNG capacity that is currently operational would be easily swamped by available supplies.

"The pace of production [is] moving at a greater pace than we can keep up with," he said. "We see a lot more associated gas being produced than some of the pundits. We don't think there's enough demand on the Texas Gulf Coast to absorb all the supply that's coming."

Tom Martin, president of Kinder Morgan Inc.'s natural gas pipelines group, said his company would work with producers to develop new pipeline projects with to help move gas out of the Permian. In the meantime, he said, objectives like increasing gas deliveries to heavy industry on the Gulf Coast and working to redirect pipelines from the Permian north will have to take short-term precedence, and some gas will still have to be stored or flared off.

"We need that takeaway capacity from the Permian. … They need that takeaway capacity," Freeport LNG's Smith said. "There's a huge basis differential ... because they can't get the gas out."