Surging U.S. Crude Oil and Natural Gas Production
Since the pandemic lows of May 2020, U.S. crude oil and natural gas production has risen 37% and 17%, respectively. The engine driving that growth has been the prolific Permian Basin, where crude oil production has increased by 63% and natural gas production has increased by 74%. In fact, natural gas production from the Permian Basin has grown over four times faster than the U.S. as a whole.
The charts below compare crude oil and natural gas production in the U.S. and Permian Basin from May 2020, the pandemic low, to the most recent actual data available as of this writing.
Sources: U.S. Energy Information Administration (EIA) Short-Term Energy Outlook (August, 2024), U.S. Petroleum and Other Liquids Supply and U.S. Natural Gas Supply, Consumption and Inventories.
Lack of Takeaway Capacity Threatens Growth
Surging natural gas production, especially from the Permian Basin, is straining transportation and processing infrastructure. The Midland Reporter Telegram reported the results of an Enverus study in July 2024 that lack of takeaway capacity in the Permian threatens production growth in the region.
As oil and gas wells age, their production tends to get gassier. Novi Labs found that after 4-6 years on average, the GOR of Permian Basin wells increased to 6 MCF/bbl from approximately 2.5-4.0 MCF/bbl during the first two years of life. Rising Gas to Oil Ratios (GORs) from aging wells in the Permian Basin also contribute to the greater need for both takeaway capacity (pipelines) and gas processing capacity.
Debottlenecking Natural Gas Processing
The lack of takeaway capacity, for both sweet production as well as for sour and very sour crude oil and natural gas, is forcing the industry to consider a variety of options for debottlenecking the supply chain, including:
Increasing investment in new natural gas processing plants
Building new, smaller “Straddle Plants” upstream of larger processing plants
Locating processing capacity upstream on the well site or pad
Modular plant expansion of existing natural gas processing plants
We briefly discuss the options below:
Investing in New Natural Gas Processing Capacity. The EIA estimated in 2019, the most recent data available, “…that processing plant capacity grew most rapidly in Texas between 2014 and 2017, increasing by about 3.7 billion cubic feet per day (Bcf/d), or by approximately 15%.” Building a new cryogenic gas processing plant, however, is an expensive long-lead project that can take upwards of two years to permit, construct, commission, and bring online.
Relatively low natural gas prices resulting from the burgeoning supply create a significant disincentive to building new plants, too. The average price for NYMEX natural gas (Henry Hub) in July 2024 was $2.07 per MMBtu, as compared to $7.28 in July 2022. Low gas prices impair the ROI of large, fixed investments in new processing plants (Source: EIA Natural Gas data).
Additionally, relatively low prices for NGLs extracted from rich gas streams also discourage investment in new processing capacity. The average U.S. NGL Composite Price in June 2024 was $6.80 per MMBtu, 45% lower than it was during the same month in 2022 (Source: EIA Natural Gas data).
Despite prevailing natural gas and NGL prices, several midstream companies have announced expansion plans. In April 2024, Enterprise Product Partners announced it had expanded its gas processing capabilities in the Permian Basin and plans to add more capacity over the next two years. The Mentone West 2 Plant in the Delaware Basin is expected to come online in 2026.
In May 2024, Piñon Midstream announced increases in Delaware Basin sour gas treating capacity with the receipt of a New Source Review (NSR) permit for its Dark Horse Treating Facility. The company did not say how long the expansion would require.
In an environment where gas production is rising faster than processing capacity is being added, new plant construction is welcomed, but it is a long-term solution and funding such large capital projects remains challenging in the current pricing environment.
Building New Straddle Plants. Locating a smaller “Straddle Plant” upstream of larger natural gas processing plants is a strategy midstream operators and large E&P producers use to debottleneck pipelines, usually at specific points where Natural Gas Liquids (NGLs) accumulate and reduce pipeline capacity.
By extracting heavier NGLs upstream of larger plants, Straddle Plants debottleneck pipeline capacity, but they are typically seen as point-specific solutions and do not provide the strategic increases in processing capacity that the Permian Basin is in desperate need of today.
Upstream NGL Processing. An effective strategy for many E&P operators is to locate natural gas processing capacity on the well site or production pad. On site processing solutions boost profitability by allowing the producer to extract and sell higher-value, heavy hydrocarbons (e.g., ethane, butane, etc.) instead of letting them go into the pipeline where they are captured by the midstream partner.
Although this option is compelling, an operator’s ability to place processing capacity on the well site is contingent on its natural gas takeaway agreements with its midstream partners. In many cases, these gas gathering agreements preclude the operator from capturing NGLs.
Modular Plant Expansion. Modular expansion offers plant operators the ability to expand the capacity of existing natural gas processing plants incrementally, without making large capital investments in permanent infrastructure. Modular expansion solutions using Mechanical Refrigeration Units (MRUs) can shoulder the burden of extracting the heavier NGLs from the gas stream, lightening the load on cryogenic plant processing and allowing more total throughput.
If and when field production decreases, typically as the result of natural well declines, MRUs can be relocated to other locations. This operational flexibility helps operators flex capacity up and down as needed, while maintaining strong returns over the life of the plant.
Another factor which impacts ROI of natural gas processing plants is the price of NGLs, which are removed from the raw gas at the processing plant and then sold by the midstream entity either as purity products or as mixed NGLs into a pipeline to another processor (fractionator). Low market value of NGLs also negatively impacts ROI for investment in new gas processing plants.
The Pioneer Energy Solution: Innovative Technology for Debottlenecking Natural Gas Processing Plants
Pioneer Energy is a leader in MRU technology and tankless production systems. Our Pegasus and Pegasus Mini solutions are field-tested, proven modular gas processing solutions.
Pegasus Mini. The Pegasus Mini provides up to 1.0 MMscfd of processing capacity.
READ MORE: Pegasus Mini Product Page
Pegasus. The Pegasus provides 3.3 or 4.5 MMscfd of processing capacity, depending on low- or high-pressure applications.
READ MORE: Pegasus Product Page
Features and Advantages:
Skid or trailer mounted and equipped with quick disconnects for rapid mobilization
Teardown, transport and setup can be achieved in less than 24 hours
Efficiently processes gas to remove C3+ hydrocarbons
Modular design allows multiple units to be connected for scaling capacity on demand
Can produce a transportable, stabilized, y-grade product
Robust design and construction for reliability in harsh environments
Autonomous with push button controls
Remote monitoring for efficient operation and troubleshooting
Safe. Built for full compliance with all relevant oilfield equipment standards, including all ASME code stamped vessels and Class 1 Div 2 compliance, the unit design has also been subjected to a rigorous HAZOP process
Value Proposition – Removing Bottlenecks Where They Occur
The Pegasus and Pegasus Mini solutions provide operators with immediate and cost-effective natural gas processing capacity when and where they need it.
Benefits include:
Drop-In Solution to Remove Bottlenecks Quickly and Cost Effectively. Pegasus and Pegasus Mini systems can be quickly mobilized to the location where they will have the greatest positive impact, weather that be at the inlet to a larger gas processing facility, along the raw gas gathering line, at the gas compression station, or at the pad itself, offering operators and midstream providers a ready solution for debottlenecking pipelines and increasing plant capacity.
Efficient NGL Extraction. Using advanced refrigeration technology, the Pegasus and Pegasus Mini cost-efficiently strip heavy hydrocarbons out of the gas stream, while stabilizing them for storage and transport to market.
Increased Pipeline Capacity. Treating rich gas upstream from the main processing plant increases pipeline capacity and allows higher throughput without constructing a new pipeline.
Portable Straddle Plant. Portability means they can be located where they will have the most impact on debottlenecking takeaway capacity. The Pegasus and Pegasus Mini can serve as portable Straddle Plants to extract NGLs upstream of the main processing plant, reducing liquids and increasing pipeline capacity for leaner gas.
Increase Plant Refrigeration Capacity. Effectively increases plant refrigeration capacity without major capital investments with long lead times.
Reduce Pigging. Removing NGLs along the raw gas gathering line upstream of the main gas processing plant also reduces liquids accumulation in the line and frequency of pigging operations.
Improved Plant Efficiency. Modular expansion using Pioneer Energy’s solutions makes your existing cryogenic gas processing plant operate more efficiently with cost-effective processing for heavier NGLs.
Contact us today to learn how Pioneer Energy technology can help you quickly debottleneck your natural gas transportation and processing capacity.
About Pioneer Energy
Pioneer Energy is the leading provider of field equipment for processing natural gas at oil and gas production well sites and facilities. We are pioneering technology for decarbonizing oil & gas production with innovative technologies that offer operators the most reliable, rugged and easy-to-use solutions for reducing emissions and converting inefficiencies into profits.
Based in Colorado, our technologies are operating successfully in multiple oil and gas regions. Pioneer Energy’s engineering, field service, and remote operations teams provide best-in-class support for our domestic and international customers, and we offer custom engineering design and fabrication services in our state-of-the-art facility.
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