The last throes of sub-zero Waha

Permian gas production will keep growing, but it'll take gas-focused activity to fill all this new takeaway capacity

Over the five-year period from the third quarter of 2021 to the third quarter of 2026, only ~4.3 Bcfd of new Permian takeaway capacity came online, including only one new pipeline, Matterhorn Express, in late 2024. Dry gas production still grew ~2.0-2.5 Bcfd annually, creating persistent gas takeaway constraints and sub-zero Waha gas prices.

But now, three major Permian takeaway pipelines are under construction to Gulf Coast markets, and Energy Transfer is also developing a new-pipeline-sized expansion of Transwestern. These four projects add ~10.5 Bcfd of capacity over the next four years, and the call on Permian gas from Mexico and within the basin is likely to rise ~1 Bcfd over the same period.

That ~11.5 Bcfd of new market access would accommodate both the currently curtailed ~1.2 Bcfd and 2.5-3.0 Bcfd of growth each year thereafter. Public Permian midstream operators agree that the ongoing Permian gas takeaway buildout will un-constrain the basin, but the market is increasingly worried that Permian gas supplies will fill this takeaway capacity, weighing on Henry Hub prices.

But as I’ll show, accelerating base declines mean that even a consistent pace of Permian activity — itself unlikely — won’t fill forthcoming takeaway capacity unless the pace of single-well gas productivity accelerates sharply.

Declines from existing wells

Because the Permian is now such a mature play, forecasting gas production from existing wells is much more straightforward than forecasting either future activity levels or the productivity of future wells. However, traditional Arps-based approaches to building type curves systematically under-forecast gas volumes in the middle of a well’s life, when the rate of gas decline slows dramatically relative to that for oil and gas-oil ratios rise rapidly.

Instead, I use an Arps-based forecast for oil volumes and forecast gas volumes based on the typical trajectory of gas-oil ratios through the well’s life. This approach adds ~800 MMcfd to medium-term gas production compared with a typical Arps-based approach. However, even this approach points to continued acceleration in base declines. Rising production levels mean that even if the pace of PDP declines remains consistent, the level of base declines increases.

Figure 1 | Permian PDP gas volumes and first-year declines from wells TIL by 2025