Texas Permian Basin needs more gas pipelines as production swamps current facilities

Fuel Fix:
America's most prolific oil field is now its worst market for natural gas.

A pipeline shortage that's leaving gas trapped in West Texas' Permian Basin means prices for the fuel there are the lowest of any major U.S. hub, wresting that distinction from Appalachia's Marcellus Shale. Prices for Permian gas, produced alongside oil in the play, have tumbled 30 percent from a year ago, while output rose to a record. And the pipeline crunch is also pummeling the region's oil market.

All that gas production is creating a dilemma for drillers, who may be forced to curtail oil output if they can't get their gas to market. Producers can burn off some of the gas -- a process known as flaring -- but state regulators typically won't allow that to happen indefinitely. And as mild spring weather limits demand for the heating fuel, explorers may be giving their gas away, according to broker Ion Energy Group LLC.

In the next three to four weeks, "natural gas prices in the Permian can go to zero because it's literally a byproduct," Kyle Cooper, consultant for Ion Energy in Houston, said by telephone. "There's so much gas coming the system really pushes and fights to get it out."
There is an opportunity there for the gas pipelines if they can seize it.  There are already several pipelines in the works for getting the oil to Corpus Christi, the nearest port.  A gas pipeline to Corpus and an LNG facility would probably take care of the oversupply.   Pipelines might also tap the gas markets in central Texas where Austin and San Antonio have growing populations.


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