Because most Permian natural gas is associated gas produced alongside oil, operators can often end up with more gas than local markets can absorb. With limited pipeline capacity to move those volumes out of the basin, producers may be forced to sell gas at steep discounts or even pay others to take it, resulting in negative gas prices.
Drivers behind Permian gas prices:
- Strong oil production continues to drive growth in associated gas production across the Permian.
- As wells age, they produce more gas relative to oil. This adds even more gas to the pipeline system and increases the need for takeaway capacity.
- Spring maintenance on major pipelines reduced available capacity at the same time production was rising, worsening congestion and pushing Waha prices below -$5/MMBtu.
- Kinder Morgan’s GCX expansion added about 0.6 Bcf/d of takeaway capacity, helping ease bottlenecks and support the recent recovery in Waha prices.
- Additional projects, including Blackcomb, Hugh Brinson, and Apex, are planned to move growing Permian gas supplies to Gulf Coast markets and LNG facilities.
While pipeline expansions and record Texas power demand provided near-term relief, associated gas production continues to grow alongside oil output, keeping pipeline capacity a critical constraint. As Permian gas production rises and new LNG projects increase demand along the Gulf Coast, additional takeaway capacity will be critical to avoiding future bottlenecks and supporting continued production growth.
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