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By Julian Hast
The Permian Basin is on track to become the largest US natural gas-producing region by the end of the decade, making the world’s most productive oil shale field also the nation’s leader in gas output, according to Citigroup Inc. analysts.
The change would push the basin, which covers parts of West Texas and Southeast New Mexico, ahead of the Marcellus shale region. The Marcellus basin, which stretches across Pennsylvania, West Virginia and Ohio, has been the largest gas-producing basin since 2012, according to data from the US Energy Information Administration.
The Permian’s ascendance would shift US gas market dynamics, changing the market to one led by a field where output is largely unresponsive to gas supply and demand. Unlike the Marcellus, the economics of production in the Permian are mostly determined by oil prices, with gas produced as an involuntary and sometimes undesirable byproduct.
The prolific basin could take the lead among gas producers as soon as 2030, though the pace will partly depend on oil prices, Citi analyst Scott Gruber said in an interview with Bloomberg.
Gas prices in the Permian were negative for four months this year as higher oil production caused gas to flood the market while pipelines bringing the fuel to end-users ran full. Some producers shut in wells with higher gas-to-oil ratios to limit losses. A wave of new gas pipelines in Texas have recently secured financing and are expected to remedy the pricing dislocation after they’re constructed.
Read More: Permian Gas Drillers Shut Wells After Months of Negative Prices
The additional Permian gas supply also means shale fields that mostly produce gas, such as the Haynesville Basin in northwest Louisiana and East Texas, will not have to ramp up as significantly to meet growing sources of demand. Increased capacity will moderate “the long-term bull case for gas prices” as new liquefied natural gas export terminals and power-hungry data centers come online, Citi analysts Gruber, Paul Diamond and Johan Monge wrote in a note to clients.
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