Billions of Dollars Invested in Permian Basin Natural Gas Infrastructure

Texans For Natural Gas | September 6, 2018

The Permian Basin has seen record-breaking oil and natural gas production in recent years, but a lack of pipeline infrastructure has limited the region’s ability to reach its full potential. The good news is that’s changing. Numerous pipeline and other infrastructure projects are in the works to connect the vast amount of oil and natural gas in the Permian to both domestic and international markets.

A recent Wall Street Journal article explored one of the side effects of limited pipeline capacity in the Permian, namely the use of flaring. But it’s important to note that, based on the pipelines and natural gas processing facilities currently under construction, this is a temporary problem that is already being addressed with long-term investments. Indeed, billions of dollars already invested in new infrastructure will not only increase operators’ ability to transport higher levels of oil and natural gas production to market, it will also allow for more associated gas to be captured rather than flared.

Here is a quick look at several of the large scale investments in the Permian:

Combined, these new projects alone will add 5.83 Bcf/d of new capacity. To put that into perspective, 5.83 Bcf/d of capacity is equivalent to a little over half of all natural gas production in the Permian Basin, which is currently about 11.3 Bcf/d.

In addition, a total of nine pipeline projects – three of which have already been completed – are set to deliver Permian natural gas to Mexico this year with a combined capacity of 9.6 Bcf/d. The projects yet to be completed will be finalized once corresponding pipelines have been completed in Mexico, which will transport the gas to several Mexican natural gas-fired power plants currently under construction. As Victoria Zaretskaya, a Washington-based analyst for the U.S. Energy Information Administration (EIA), told Bloomberg last month,

“These projects ‘will provide some relief for the constrained Permian production’ and boost total U.S. gas exports south of the border to 5 billion cubic feet a day. ‘In the second part of this year we see the beginning of the pivotal stage in U.S.-Mexico pipeline exports as more pipelines are commissioned on Mexico’s side.’”

But pipeline infrastructure projects are just part of the total investment planned in the Permian:

Small-scale LNG facilities, called micro LNG facilities, are also being proposed in the Permian. These facilities, which are already in use in other U.S. shale plays, allow for several thousand gallons of LNG to be transported for various end uses, including to power drilling rigs within the region.

The substantial investment in natural gas infrastructure show how current issues in the Permian Basin are being addressed with long-term solutions. These new projects will not only alleviate the current constraints on the region, but will also allow for the basin to reach even higher production levels and spur even greater economic benefits for Permian communities.

In a nutshell, the billions of dollars being invested in natural gas infrastructure in the Permian Basin will increase American energy production, reduce flaring, and improve our balance of trade.

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