Permian Gas Fuels Midstream/MLP Investments


  • Under pressure from low prices, overall natural gas production in the US is now expected to decline slightly this year from 2023 levels. The Permian Basin is an exception, expecting steady growth.
  • Permian basin natural gas production growth is due to the rising natural gas production from oil wells, known as associated gas.
  • Energy infrastructure companies are investing in building incremental transportation and processing capacity, and Permian gas is expected to help meet growing LNG demand.

With natural gas prices falling nearly 30% so far this year from already low levels, some producers are curtailing output, particularly in gas-focused basins. However, the Permian region is still expected to see natural gas production growth in 2024, and midstream companies are investing in transportation and processing capacity for the increased volumes. Today’s note examines natural gas production growth in the Permian Basin and the projects midstream companies are investing in to keep pace.

Permian Gas Production Set to Grow Even as Broader US Gas Production Temporarily Stalls

The weak natural gas price environment so far in 2024 has challenged US producers, which have begun to cut spending in 2024 and curtail production. Curtailments have been relatively minor, but the US Energy Information Administration (EIA) now expects total US natural gas production to decline for the first time since 2020. While the projected decline is minimal—just 0.4% below 2023 levels—it highlights the pressure low prices has put on producers.

Gas production in the Permian basin is largely associated gas or gas produced as a byproduct from oil wells. The Permian has seen steady growth in associated gas over the past decade, with the basin now leading overall US natural gas production growth.

Growing Permian gas production is being driven by both oil production growth and rising gas-to-oil ratios. Gas produced per barrel of oil produced in the top Permian plays has risen from 2 thousand cubic feet per day (Mcf/d) to over 3 Mcf/d. The dynamic has tied natural gas production growth to oil prices, meaning strength in oil prices can contribute to higher natural gas production in the Permian.

With rising output and demand, there is a greater need for incremental natural gas infrastructure in the Permian. There has already been an increase in pipeline takeaway capacity (read more), while rising demand from expanding liquefied natural gas (LNG) capacity on the Gulf Coast should create additional pipeline opportunities for midstream. By 2028, US LNG capacity is set to increase from 13.8 billion cubic feet per day (Bcf/d) to 24.9 Bcf/d along the Gulf Coast (read more).