American Oil and Gas Reporter - September 2020 - 66

pages 64-67_Layout 1 9/18/2020 4:41 PM Page 66

SpecialReport: Permian Powerhouse
FIGURE 3
Permian Natural Gas Production and Takeaway Capacity
Whistler in 3Q21

18
16

PHP in 1Q21

14

Bcf/d

12

GCX to Agua Dulce in 4Q19

10
8

Local Demand

6

Productive Forecast

4

Effective Takeaway
Prior Forecast (Nov-19)

2

any remaining Permian takeaway constraints when it came on line in April.
Even with the pullbacks in both actual
Permian production and forecasted production in 2021 and beyond, more
pipeline capacity is on the way. We understand that Enterprise Products Partners
is in the process of commissioning its
Midland-to-ECHO 3 (dashed yellow
line) project, which will add up to
450,000 bbl/d of capacity between Midland and the Houston area. Then, in the
second half of 2021, a joint venture
that includes Plains and ExxonMobil
plans to start operating the 650-mile,
1.5 MMbbl/d Wink-to-Webster Pipeline
(dashed pink line), which will transport
Permian crude from the Wink and Midland areas in West Texas to Webster,
Baytown and Texas City, all of which
are near Houston. (Midland-to-ECHO
3 is an element of the larger Wink-toWebster project.)
While the Permian has considerably
more pipeline takeaway capacity than it
is likely to need in the near term, it's
important to point out that most of the
newer pipelines have minimum volume
commitments (MVCs) in place for much
of their capacity. For example, ExxonMobil, which owns of a 561,000-bbl/d
refinery in Baytown and a 362,000-bbl/d
refinery in Beaumont, has an MVC in
place for a substantial portion of the
Wink-to-Webster project's capacity. So
do project partners MPLX (a master
66 THE AMERICAN OIL & GAS REPORTER

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limited partnership whose sponsor,
Marathon Petroleum, owns the 585,000bbl/d Galveston Bay refinery in Texas
City), Delek U.S. (another refinery owner), and Rattler Midstream (a subsidiary
of Diamondback Energy).
Takeaway Issues Remain
Of course, Permian tight oil wells also
produce vast volumes of associated gas
that must be processed and transported
to market. Permian gas production has
been on a roller-coaster similar to the
one crude's been riding. At the end of

2019, Permian gas production was averaging 11.56 billion cubic feet a day, and
our forecast at the time (dotted yellow
line in Figure 3) indicated that gas production there would rise to 12.24 Bcf/d
this summer, 12.88 Bcf/d in winter 202021, and 13.38 Bcf/d in summer 2021.
Instead, Permian gas production averaged only 10.42 Bcf/d in May, or 13%
less than in February, and production this
summer was expected to average only
11.14 Bcf/d (total of gray and blue layers).
As for what lies ahead, RBN now forecasts
that production will decline slightly this
winter to 11.01 Bcf/d, then inch up to
11.08 Bcf/d by next summer. In a phrase,
it also will be close to flat.
Of the roughly 11.1 Bcf/d currently
being produced in the Permian, 1.1 Bcf/d
is consumed within the basin (blue layer
in Figure 3), leaving 10 Bcf/d that needs
to be piped to other regions (gray layer),
including the Gulf Coast, Mid-Continent,
Southwest and Mexico. Unlike the situation with Permian crude, whose pipeline
takeaway concerns largely have been addressed by new pipelines, there are still
gas takeaway issues in the basin, especially
when one or more key gas pipelines are
off line for maintenance.
Maintenance outages aside, takeaway
constraints eased somewhat in the fourth
quarter of 2019, when Kinder Morgan,
DCP Midstream and Targa Resources'

FIGURE 4
New and Planned Permian Natural Gas Pipelines

Midland
Wink

Orla

Crane

Gulf Coast Express

Permian Highway

Houston

Whistler

Three Rivers

Corpus Christi
Gulf Coast Express
Permian Highway
Whistler



American Oil and Gas Reporter - September 2020

Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2020

Contents
American Oil and Gas Reporter - September 2020 - Intro
American Oil and Gas Reporter - September 2020 - 1
American Oil and Gas Reporter - September 2020 - 2
American Oil and Gas Reporter - September 2020 - 3
American Oil and Gas Reporter - September 2020 - 4
American Oil and Gas Reporter - September 2020 - Contents
American Oil and Gas Reporter - September 2020 - 6
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