Permian Basin producers are eager for a new pipeline project to carry gas out of West Texas, Williams Cos. Inc. CEO Alan Armstrong said May 22, and he expects his company to be part of a solution in the near future.
"I would be surprised if we're not part of a very significant [Permian pipeline] project," Armstrong told a Houston crowd gathered at an Argus Media conference.
Williams has done some initial work on a project, and after talking to producers, the company has been surprised by the level of interest. Both oil and gas pipelines are running close to full capacity in the region, and Permian production is expected to continue to climb. The infrastructure shortage has depressed local commodity prices. Producers take about a $10 discount to get barrels from Midland, Texas, to Cushing, Okla., while gas prices are about a $1/MMBtu cheaper around the Permian than the benchmark Henry Hub.
More broadly speaking, Armstrong said midstream infrastructure costs are getting higher, and the industry needs to look at ways to keep costs down. The costs for processing segments are spiraling out of control, he said, from 8% of a pipeline budget in 2010 to 25% now. In a few years, he said, processing could take up 50% of the cost structure.
Legal challenges have also pushed costs higher, and Armstrong encouraged industry members to continue to push back against environmental groups that try to shut down pipeline projects with a flood of lawsuits.
Consumers bear the costs from those challenges, he said. "We have the lowest price for gas in the country in Susquehanna County, Pa., and the highest prices 150 miles away, and that's all infrastructure," he said. "It can be solved by building a pipeline."
Armstrong, whose company is sparring with New York officials over a proposed expansion of the Transco pipeline and has been unable to build the Constitution pipeline, said the industry has to convince the public that the pipelines will benefit them.
"We have got to be much stronger with how we deal with political opposition to getting pipelines built," he said. "We have to do a better job of telling our story of the benefits of natural gas here in the U.S. We have to make sure our voice is just as strong and just as clear."
