New pipelines are expected to ease glut of Permian natural gas

In the energy sector, pipelines play a similar role to railways that move large volumes of cargo across the country. Pipelines bring crude oil and natural gas from where it’s extracted closer to refineries, power plants and ports. There’s a new pipeline scheduled to begin service this month that will help move natural gas out of West Texas, home to a glut of natural gas. In fact, there are several Permian Basin pipelines … in the pipeline.

​Where there’s crude oil production, there’s natural gas. And in the Permian Basin, there’s a lot of both: “As a country, we hit a record high volume of oil production of 13.4 million barrels a day,” said Tom Seng, a professor at Texas Christian University. 

​Nearly half of that recent peak is from the Permian Basin. 

“So for every one of those oil wells, you do have some level of natural gas that’s being produced,” Seng said.

​That growth in crude oil production created a glut of natural gas, said economist Karr Ingham, president of the Texas Alliance of Energy Producers. “It’s being produced by companies that want the crude oil, and they’re having to deal with natural gas as a byproduct.”

​The growth has also been detrimental to prices, said Ed Hirs, an energy economist with the University of Houston.

“We’ve seen many instances over the past half a dozen years where the price has actually gone negative,” Hirs said. “In other words, the natural gas has really had no place to go.”

​The new pipelines in the works will give all that Permian natural gas a purpose.

“They’re going to go to the Gulf Coast, where they’re going to be put to use in plants that utilize that natural gas,” said economist Ingham. “It’s going to be loaded on boats and LNG facilities and sent somewhere around the world.”

​These pipelines, which roughly cost $1 million per mile to build, will also level out regional natural gas prices.

“The physical balancing act of adding more gas and moving it from one side of the state to the other is also going to balance prices out between the west side of Texas and the east side of Texas,” said Seng with TCU.

​Although, he said, if natural gas production continues to grow, there may be more gluts in the future.