Breaking Free from Bottlenecks: New Pipeline Unleashes US Oil Production
The Permian Basin, spanning across Texas and New Mexico, is the epicenter of the US oil industry, accounting for a staggering half of the country’s crude output. However, a major hurdle had been hindering its growth: pipeline constraints. That was until the recent launch of the Matterhorn Express pipeline, a game-changer for the region.
A New Era of Gas Production
This 580-mile pipeline, a joint venture between four industry giants, has brought much-needed relief to the region. With the capacity to carry up to 2.5 billion cubic feet of gas per day, it has added a significant 14% to the regional capacity. The impact is palpable, with gas prices at the Waha hub in west Texas rising above zero since mid-September.
Producers Rejoice
For oil and gas producers, the pipeline has been a blessing. “Matterhorn has freed up space, and the price we are getting for gas now has been positive for almost a month,” exclaimed Mike Oestmann, CEO of Tall City Exploration. The increased profits have enabled producers to ramp up crude production growth, reducing the need for gas flaring.
Unlocking Higher Permian Oil Output
Industry experts agree that the Matterhorn pipeline will unlock higher Permian oil output. “If you cannot move the gas out and you have to increase flaring levels or bring in other mitigating measures, then that just really puts a ceiling on how much oil you can produce,” explained Jason Feit, advisor at consultancy Enverus. The pipeline is expected to carry 0.6 bcf/d, paving the way for increased oil production.
Short-Term Relief, Long-Term Challenges
While the Matterhorn pipeline brings temporary relief, market participants warn that it will likely be filled next year, resulting in pipeline constraints once again. Permian gas production is projected to surge to 24.5 bcf/d in 2024 and 25.8 bcf/d in 2025, according to the Energy Information Administration. The Blackcomb gas pipeline, set to start operations in 2026, will provide further relief, but the period between Matterhorn filling and Blackcomb starting operations may depress Waha gas prices.
A Glimpse into the Future
As the oil industry continues to evolve, one thing is clear: the Matterhorn Express pipeline has marked a significant turning point for the Permian Basin. With its increased capacity and improved drilling efficiency, the region is poised to reach new heights. However, the industry must remain vigilant, addressing the long-term challenges that lie ahead to ensure sustained growth and success.
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