Viewpoint: Permian gas output to rise after merger

  • Spanish Market: Crude oil, Natural gas
  • 29/12/23

Natural gas output from the Permian basin is expected to rise in 2024, as newly consolidated producers boost drilling and funnel more gas into an oversupplied US market.

Oil prices in the past year have been high enough to support drilling in the Permian, even as sharply lower gas prices led to a strong pull-back in the development of gas fields like the Haynesville shale in east Texas and northern Louisiana. The ongoing development of the Permian, straddling west Texas and southeastern New Mexico, plus additional pipeline capacity, will push production of more associated gas from oil wells to key markets along the US Gulf coast.

The resulting increases in gas supply in 2023 helped push prompt-month gas prices earlier this month to six-month lows below $2.50/mmBtu. Additional supply early next year could help curb withdrawals from US gas storage, leaving inventories at high levels and potentially glutting the market.

Permian gas output has been in the spotlight this year as gas prices slid lower. Gas producers will often rein in drilling when prices collapse, but drilling decisions in the Permian, the second-largest gas field in the US, are based on oil prices rather than gas. Gas production growth there is usually a byproduct of oil output and unfettered by a downturn in gas prices.

A recent acquisition by ExxonMobil of Permian-focused oil producer Pioneer Resources for $59.5bn will likely bolster drilling by allowing the combined company to increase scale and cut costs in the Permian, boosting profitability even at lower oil prices. Pioneer's assets could boost ExxonMobil's push into the Permian basin by increasing its crude production there.

Improved well-level productivity and higher crude prices in 2024 likely will spur more drilling, leading to an increase in associated gas production. Permian gas production is expected to rise by 1.4 Bcf/d (40 mn m³/d), or 6pc, in 2024, the US Energy Information Administration (EIA) said. Production hit an all-time record of 17.8 bcf/d in December, according to analysts with Energy Aspects. Crude production in the Permian is expected to rise by 5,000 b/d to a record 5.986mn b/d in January, according to the EIA's most recent Drilling Productivity Report.

The rising production has already led to the build-out of additional infrastructure needed to ferry that gas to market. The additional capacity largely came through the expansion of existing gas pipeline systems. In late August capacity on WhiteWater Midstream's 2 Bcf/d Whistler pipeline rose by 500mn cf/d. Kinder Morgan by December expected capacity expansions to be finished on the 2.1 Bcf/d Permian Highway pipeline (PHP) and Gulf Coast Express (GCX) pipeline. Those expansions were estimated to raise capacity on PHP and GCX by 550mn cf/d and 570mn cf/d, respectively.

The additional capacity on Kinder Morgan's two lines could provide a short-term buffer ahead of the startup of the 2.5 Bcf/d Matterhorn Express pipeline, which will move gas from the Waha hub to Katy, Texas. The pipeline, a project between WhiteWater Midstream, EnLink Midstream, Devon Energy and Marathon Petroleum's MPLX, is expected to come on line in the third quarter of 2024.

Without capacity additions, Permian gas production would eventually be stranded, potentially pushing prices into negative territory.

Sellers needed to pay buyers to take gas at the Waha hub in west Texas several times in 2023 as spot prices were pushed down by high production, mild weather and constrained takeaway capacity. Prices tended to turn negative when all three factors occurred simultaneously.

The Waha index, an indicator for the value of Permian gas supplies, fell to -$3.025/mmBtu on 13 January, the lowest in 2023. Waha prices averaged below $2/mmBtu from January-November, only topping $3/mmBtu on 30 January. Argus forward curve data for the week ended on 22 December showed Waha prices for January-March 2024 at $1.80/mmBtu.


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22/04/24

Oman’s PDO to hit 700,000 b/d crude before 2030 target

Oman’s PDO to hit 700,000 b/d crude before 2030 target

Muscat, 22 April (Argus) — Oman's state-controlled PDO has several new greenfield projects that it is looking to bring on stream that should see it reach, and blow past, its target for 700,000 b/d of crude before the end of the decade. Speaking at the Oman Petroleum and Energy show in Muscat today, PDO's managing director Steve Phimister said the company has a portfolio of new "sizeable" projects in the pipeline and expects to reach 700,000 b/d by the "middle of the decade". "But what we would not be going to see in the next couple of years are multibillion dollar projects like Yibal Khuff or Rabab Harweel," he added. PDO's Yibal Khuff — one of Oman's most technically complex upstream projects — came online in 2021 and production was 20,000 b/d in 2022, according to the latest available data for production. Rabab Harweel , Oman's largest enhanced oil recovery (EOR) project, came onstream in 2018 and is producing more than 70,000 b/d. PDO adds around 10,000-15,000 b/d to its production on an average every year, according to Phimister. "Our strategy is to go above 700,000 b/d," he said. "We could, in principle, go quite way above 700,000 b/d of black oil, depending on oil price, shareholder's desire on where they want to invest". But he said PDO wants to grow in "a sustainable way" while "balancing out emission targets." The company in 2021 pledged to reach net zero carbon emissions from its operations by 2050 . The company is likely to hold onto its previous capital expenditure plans, although this is subject to final approval, Phimister said. "We have invested roughly the same amount of capital in the last few years and continue to do so," he said, adding that PDO now has a dual challenge of growing old business while reducing carbon emissions. PDO's planned capital expenditure for last year was $5bn and operating expenditure was at $2bn, in line with 2022 levels. The Omani state owns 60pc of PDO, Shell holds 34pc and TotalEnergies has 4pc. By Rithika Krishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Balticconnector gas pipe recommissioned after rupture


22/04/24
22/04/24

Balticconnector gas pipe recommissioned after rupture

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ExxonMobil turns up heat on climate activists


22/04/24
22/04/24

ExxonMobil turns up heat on climate activists

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Japan's Jera shuts Chiba gas-fired power unit


22/04/24
22/04/24

Japan's Jera shuts Chiba gas-fired power unit

Tokyo, 22 April (Argus) — Japan's largest electricity producer by capacity Jera has shut the 360MW No.1-4 combined cycle gas turbine (CCGT) units at its Chiba power complex because of a technical problem. Jera closed on 22 April the CCGT units at the 4.38GW Chiba complex in east Japan's Chiba prefecture, according to a notice by Japan Electric Power Exchange (Jepx). It is unclear when the units will be brought back on line. The unexpected shutdown is likely to have limited impact on Japan's power market as the country has experienced mild weather lately that has capped power consumption. Jera consumed 16.7mn t of LNG in April-December 2023, lower by 4.8pc compared with the same period a year earlier, according to the firm's latest financial results. Japan's total power demand averaged 83GW during 15-21 April, down by 3pc from the previous week, data show from nationwide transmission system operator the Organisation for Cross-regional Co-ordination of Transmission Operators. Japan plans to add 1.1GW of thermal capacity during the week to 28 April, with the addition of 11.5GW outstripping the closure of 10.4GW, according to Argus' survey based on a Jepx notice. The difference incorporates the net increase this week in gas-fired capacity of 2GW and the net drop in coal-fired capacity of 887MW. By Reina Maeda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Australia's QPM to focus on gas, cut Tech battery spend


22/04/24
22/04/24

Australia's QPM to focus on gas, cut Tech battery spend

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