Reuters: Texas natural gas pipeline clears bottlenecks, paving way for higher shale production

Matterhorn began operations last month, eliminating bottlenecks that had at times forced producers to pay other parties to receive their gas or seek government permits to burn the gas. The line, a joint venture between WhiteWater Midstream, EnLink Midstream, Devon Energy and MPLX, can transport up to 2.5 billion tons³/day gas, increasing new regional capacity by 14% through expansion this year.

The Permian Basin, which stretches across Texas and New Mexico, accounts for half of U.S. crude oil production and is the second largest shale gas producing region. “Matterhorn has freed up space and the price we are now getting for gas has been positive for almost a month,” said Mike Oestmann, CEO of Midland producer Tall City Exploration. “We produced a lot of gas that not only didn’t we get money for, but we also paid to have it shipped away,” he added.

Gas prices at the Waha hub in West Texas have been largely above zero since mid-September, after Matterhorn began operations. Last week, Waha prices reached $2.35 per million Btu, their highest level since mid-June. For oil and gas producers, the pipeline helps boost profits as gas commands higher prices, allowing them to increase crude production growth with less gas flaring, analysts said. Natural gas is a byproduct of oil production.

“If you can’t remove the gas and have to increase flaring or implement other mitigation measures, then that really puts a cap on how much oil you can produce,” said Jason Feit, a consultant at consulting firm Enverus.

The Matterhorn will help enable higher oil production in the Permian, said David Seduski, head of North American gas analysis at consulting firm Energy Aspects. It is estimated that the Matterhorn carried 0.6 billion F³/d last week.

Most of the Permian’s estimated oil production growth in 2025 would not be achievable without more gas pipeline capacity, said Seduski, who forecast an additional 350,000 bpd next year. According to the Federal Reserve Bank of Dallas’ Quarterly Energy Survey, a fifth of Permian oil producers surveyed in September reported plans to increase well completions once the pipeline bottleneck is cleared. According to the Energy Information Administration, Permian crude oil production is expected to rise 6.1% to 6.27 million bpd this year and reach 6.5 million bpd next year, partly due to improved drilling efficiency.

The Matterhorn is likely to fill next year, causing pipeline constraints again, market participants said. Gas production in the Permian is expected to increase to 24.5 billion f³/d for 2024, from 22.7 billion f³/d in 2023, according to EIA. It is expected to reach f25.8 billion³/d in 2025. “Matterhorn only gives you a limited amount of time, maybe 12 to 18 months, and then you need another whistle,” Jim Simpson, CEO of consulting firm East Daley, said in an interview.

The Blackcomb gas pipeline, on which a final investment decision was made in July, will move another 2.5 billion f³/d Natural gas from the Permian to South Texas. Commissioning will occur in the second half of 2026. The period between Matterhorn filling and Blackcomb’s commissioning could depress Waha gas prices as producers face further shortages, said Jay Stevens, director of market analysis at Aegis Hedging.

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