Gross natural gas withdrawals in the Permian region set an annual record high in 2022 at 21.0 billion cubic feet per day (Bcf/d), 14% above the 2021 average, according to our Drilling Productivity Report. Annual gross natural gas production in the Permian region, which extends across western Texas and eastern New Mexico, has been rising steadily for over a decade and continued to grow in the first four months of 2023.
Producers in the Permian Basin respond to fluctuations in the crude oil price when planning their exploration and production activities because most of the natural gas production in the Permian Basin is associated with natural gas produced from oil wells. The Permian Basin is the second-largest natural gas-producing basin in the United States, after the Appalachia Basin, which spans Pennsylvania, West Virginia, and Ohio. In the Appalachia Basin, well-drilling activity is focused on natural gas, making production less directly responsive to crude oil prices.
Crude oil prices declined in 2020 as the COVID-19 pandemic reduced global oil demand. Prices averaged $39 per barrel (b) in 2020, contributing to a rapid drop in the rig count to a low of 122 rigs in August 2020 and an average of 220 rigs for the year. Later, as crude oil prices began to increase, averaging $68/b in 2021 and $94/b in 2022, so did the rig count, averaging 240 rigs in 2021 and 335 rigs in 2022. As the rig count grew, Permian natural gas production rose.
As natural gas production increases in the Permian Basin, midstream pipeline companies continue to increase the region’s takeaway capacity. Companies have announced an additional 4.2 Bcf/d of new pipeline capacity will come online by the end of 2024, allowing more production to reach consumption markets and liquefied natural gas terminals on the U.S. Gulf Coast:
The Whistler Pipeline Capacity Expansion is expanding compression by installing three new compressor stations on the pipeline, increasing capacity by 0.5 Bcf/d to 2.5 Bcf/d. The project is expected to enter service in September 2023.
The Permian Highway Pipeline Expansion is expanding compression, increasing capacity by 0.55 Bcf/d to 2.65 Bcf/d. The project is expected to enter service in November 2023.
The Gulf Coast Express Pipeline is expanding compression, increasing capacity by 0.6 Bcf/d to 2.65 Bcf/d by December 2023.
Matterhorn Express Pipeline is adding 2.5 Bcf/d of takeaway capacity by the fourth quarter of 2024. The 490-mile-long pipeline will transport natural gas from the Waha Hub to Katy, Texas.
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