Page 4 - LatAmOil Week 41

LatAmOil COMMENTARY LatAmOil

(Image: EIA)
Options for Permian Basin gas

The region is headed for a net fall in production this year and does not need as much pipeline capacity

as previously anticipated. But it is sending more gas to Mexico, and exports may continue to increase

UNSURPRISINGLY, Permian Basin gas pro- and November, having climbed to an estimated
duction – largely a by-product of drilling for 16.79bn cubic feet (475.5mn cubic metres) in
WHAT: oil in the region – took a severe hit earlier this September. On a nationwide level, the agency
Gas producers in the year after operators scrambled to scale back expects US gas production to begin rising again
Permian Basin are send- activity and shut in output. Since May, though, from the second quarter of 2021, in response to
ing more gas to Mexico, some recovery has taken place as crude prices higher prices for both oil and gas.
even though they do not stabilised and demand improved. Even so, these
need as much pipeline gains are not expected to be enough to reverse Turnaround in the Permian
capacity as expected. the overall decline in US gas production for 2020 This volatility marks something of a turnaround
compared with 2019. for the Permian, which was previously grappling
WHY: The US Energy Information Administra- with a glut of gas that had resulted in a scramble
Permian gas production tion (EIA) noted in its most recent Short-Term to build new pipeline capacity, as well as record
has recovered since May, Energy Outlook that the Permian was on track levels of flaring and venting. Indeed, in some
but not enough to reverse to experience larger gas production declines ways, this year’s downturn is seen as providing
overall declines in US
output. than any other region of the country this year. some reprieve to Permian producers struggling
This is hardly surprising. Gas yields are linked with excess gas volumes.
WHAT NEXT: much more closely to the performance of oil Despite this, new takeaway capacity is still
Deliveries to Mexico may prices in this region than they are in other shale being added to the basin, allowing Permian gas
continue to rise, thanks plays, and oil prices remain vulnerable to new to flow to the Gulf Coast, as well as across the
to plans for LNG export waves of volatility. border to Mexico. And flows to Mexico have
terminals on the West The EIA’s latest drilling productivity report recently been boosted by the start-up of the 388-
Coast. projects that Permian gas output will fall km Villa de Reyes-Aguascalientes-Guadalajara
slightly on a monthly basis in both October (VAG) pipeline.

P4 www. NEWSBASE .com Week 41 15•October•2020