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So Much Natural Gas—But Where to Put It?



In the nineties, a bumper sticker with the words “happiness is multiple pipelines” could be seen slapped on cars from Houston to Washington, D.C., to Baku, Azerbaijan. Though that slogan referred to the effort to build other pipelines that bypass Russia to move oil out of the Caspian Basin, the sentiment applies today in Texas, too. There are simply not enough pipelines to take away the natural gas being produced in the Permian Basin to markets where it can be used.

The Wall Street Journal highlighted this issue in a Monday story:

Pipelines running from the region’s Permian Basin to the Gulf Coast’s chemical plants, cities and export terminals are essentially full. Drillers in the Rockies and Canada already supply markets in the north and west.

There is plenty of room on pipelines running south to Mexico, which has emerged as a major market for U.S. producers, but there is a catch: much of the gas distribution infrastructure and power plants there that would buy the fuel haven’t been built yet.

The number of rigs in the Permian has climbed more than 70 percent in the last year, to 391, the Journal reported. But this abundance of gas is depressing prices for the commodity, and may force producers to temporarily put the brakes on drilling. If that doesn’t happen, “the roughly 6 billion cubic feet of gas that needs to be moved out of West Texas each day will rise to 8.5 billion cubic feet by late 2019,” the Journal continued, citing a report from Sanford C. Bernstein & Co. “That will exceed what pipelines can transport north, east and west from the Permian.”

One sector capitalizing on cheap natural gas has been the power industry. Vistra Energy Corporation, the Irving-based owner of Luminant, bought a 1,054 megawatt power plant in Odessa in August, which will be powered by gas from the Permian. Meanwhile, Luminant is slated to close three coal-fired plants—Monticello, Big Brown, and Sandow—and its Three Oaks coal mine, near Elgin, this January, at a loss of 600 jobs at the four sites.

The amount of oil and gas still locked in the Permian Basin is staggering. “[S]ince 1923 more than 30 billion barrels of oil have been extracted from the Permian Basin. Yet according to IHS-Markit, it still contains more than twice as much recoverable oil as has been drilled over the last 94 years,” Joe Nocera wrote in a BloombergView column in September. “Indeed, the greatest oil field of them all, the Ghawar field in Saudi Arabia, is estimated to have the same amount of recoverable oil—70 billion barrels—as the high end of IHS-Markit’s estimate.”

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10 Comments on "So Much Natural Gas—But Where to Put It?"

  1. Shortend on Thu, 23rd Nov 2017 9:23 am 

    Looks like we are going to put it in the atmosphere, no need to be concerned…Trump says so….

  2. rockman on Thu, 23rd Nov 2017 12:04 pm 

    There will not be an excess number of NG wells drilled in the Permian Basin. That is not how the economic analysis of NG prospects is calculated. One critical factor in the calculation is dependent on the price being paid by the local transmission system. If that system is at capacity there is no price being paid for any new NG. I’ve seen many prospects not drilled in the last 40 years because there was no pipeline capacity.

    But I have seen a very small number of operators make such stupid decisions. I once took over a position of a former geologist at a very small company and got a well started on a prospect he got management to OK. About the time the well was almost down I mentioned to a VP that the company was very lucky to have access to a NG pipeline since the prospect was surrounded by subdivisions on the north side of Houston. He said there was no pipeline access but it didn’t matter since that former geologist told them it was an oil prospect. I explained there was a very small chance we would find oil: I knew the trend well and it we found commercial reserves it was 95% likely to be NG. He and the other managers didn’t believe me until I showed them a map with a lot of wells with NG symbols. They just about sh*t on themselves. And then I logged the well and found no hydrocarbon bearing reservoirs. You never saw a bunch of managers so happy to drill a dry hole. LOL. Had the well found a nice thick NG reservoir we would have still plugged and abandoned it. It might have costs a VP or two their jobs.

    And yes: the company was run by a bunch with no oil field experience. They bought it during a boom. Not uncommon during booms: newbies start up companies because, after all, when oil prices are high anyone can make a profit in the oil patch. With something of a boom going on in the Permian Basin there will be similar dumb moves made. Typically by non-industry investors sucked in by unscrupulous operators.

    And yes: that company went under in a couple of years. What would you expect with a real estate company with a home office in San Francisco? LOL. Trivia: it was one of the oldest US corporations. Founded by Mr. Sutters. As in Sutter’s Mill, a sawmill owned by 19th-century pioneer John Sutter, where gold was found, setting off the California Gold Rush. Survived the Civil War and two world wars but done in by the 70’s oil boom and subsequent bust.

  3. Makati1 on Fri, 24th Nov 2017 5:59 am 

    The East is moving forward as the West regresses…

    “You don’t need a weatherman to see which way the wind blows across Eurasia; integration, all the way.”

    “Vladimir Putin, Recep Tayyip Erdogan and Hassan Rouhani will hold a summit this Wednesday in Sochi to discuss Syria. Russia, Turkey and Iran are the three power players at the Astana negotiations – where multiple cease-fires, as hard to implement as they are, at least evolve, slowly but surely, towards the ultimate target – a political settlement.

    A stable Syria is crucial to all parties involved in Eurasia integration. As Asia Times reported, China has made it clear that a pacified Syria will eventually become a hub of the New Silk Roads, known as the Belt and Road Initiative (BRI) – building on the previous business bonanza of legions of small traders commuting between Yiwu and the Levant.

    Away from intractable war and peace issues, it’s even more enlightening to observe how Turkey, Iran and Russia are playing their overlapping versions of Eurasia economic integration and/or BRI-related business.”

    Moving forward on the Silk Road…

  4. Davy on Fri, 24th Nov 2017 6:10 am 

    mad kat, when you reference an article the proper procedure is to also put the title and in parentheses. You are at least putting links these days after I jumped your ass. IMA, you got the article off Zero Hedge didn’t you you sly dog!!!! and try to hide it as usual. Your buddies here hate when you go to Zero Hedge but you can’t resist it. LOL

    BTW, Pepe Escobar and Asia times are extremist anti-Americans. How can you expect them to give balance to the subject? The Silk Road is a bold move by China but come on China is drowning in a credit bubble so this just represent move malinvestment by the King of malinvestment, China.

  5. denial on Fri, 24th Nov 2017 4:00 pm 

    Mak I have been reading your post for years now….now I have to gloss over them because you contradict yourself so much…it really discredits any thoughts, ideas, comments you make…..First if you say that this is the end and it is all over for everyone well that is fine but then you try and take sides and say the west is going down and the east is going up etc…

    It does not make sense everything is interconnected in the world trade when it happens all countries will fail; it will just present itself different in each country

  6. Makati1 on Fri, 24th Nov 2017 4:36 pm 

    denial, I don’t “contradict” myself in my posts. Maybe you just do not follow my thinking? It appears so.

    The West is going down. That is not in question. But, that does not mean that the East cannot or will not go up. You believe that bullshit about trade having to fail the same all over the world because it fails in one area. “… everything is interconnected in the world trade when it happens all countries will fail…”. Not so. As you will find out. Maybe you have been fed so much bullshit about the ‘exceptionalist/indispensable US that you cannot see truth/real world until it smacks you in the face?

    The “END” is coming in the form of climate change, but that is likely, baring nuclear war, decades away. In those decades much can, and will, happen. That includes the East rising and becoming the dominant area of the world while the West, and especially the US, becomes more 3rd world. A switch long overdue.

    No inconsistency. Trade is NOT what will cause the “END” Nor will lack of oily stuff. “Mother Nature”(the laws of physics/ecology) is going to cause the human extinction (“END”) by 2100. Follow?

  7. MASTERMIND on Fri, 24th Nov 2017 5:22 pm 


    Great points. Exactly is interconnected now..Madkat just ignores that point because he is to weak minded to handle the truth.

  8. Davy on Fri, 24th Nov 2017 5:57 pm 

    “denial, I don’t “contradict” myself in my posts. Maybe you just do not follow my thinking? It appears so.”
    smacked a home run there Denial!
    mad kat, you are all over the place with your ideas, agendas, revisions, and fantasy futures. You want your cake and eat it. You are a hypocrite and a narcissist which is a horrible combination. Most of all you are an enemy of the truth and the balance people need to explore issues. You are an extremist with your emotional agenda that is your effort to justify your bugging out of the US.

  9. Adrienne on Thu, 7th Dec 2017 9:50 am 

    Energy independence in the United States is possible – even as soon as the year 2020 if we do things right!

  10. MASTERMIND on Thu, 7th Dec 2017 11:29 am 


    The US Shale Business is “not profitable” and can’t fund itself whether oil is at 100 or 50 dollars a barrel

    MIT Technology Review: Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence

    The world’s largest oil trader Vitol says US oil production will peak in 2018

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