Flaring and venting of natural gas in the Permian Basin reached an all-time high in the third quarter, averaging more than 750 MMcf/d, according to a preliminary analysis conducted by Rystad Energy.
“This represents a new all-time high,” shale research chief Artem Abramov. “Oil production in the Permian Basin is growing at an accelerated pace again, and we observe high, sustained levels of flaring and venting of associated gas in the basin.”
Rystad has been monitoring the level of gas flaring in the Permian since 2017. Its previous quarterly estimate suggested that basin-wide gas flaring averaged 600-650 MMcf/d during the nine-month period from 4Q2018 through 2Q2019.
The Permian, which straddles West Texas and southeastern New Mexico, has experienced a huge increase in flaring and venting at the wellhead in the recent years, driven by a combination of higher activity levels, more production from areas with less developed gas gathering infrastructure, and takeaway capacity bottlenecks, particularly in the Delaware and Midland sub-basins.
“The most recent increase in flaring is predominantly driven by the Delaware Texas portion of the basin, which accounted for more than 40% of basin-wide flaring and venting as of the third quarter of 2019,” Abramov said. “Northern Midland also saw a significant boost in new activity, which resulted in increased flaring of associated gas. The sub-basin has basically returned to the record level of flaring seen in the fourth quarter of 2018.”
At a company level, Rystad found that several operators had reduced their flaring intensity over the past year.
“A significant number of operators have exhibited a clear downwards shift in flaring intensity in 2019,” Abramov said. “Yet there are other examples of a recent increase in flaring intensity, which are primarily represented by some operators active in the Eastern Midland Basin.”
Goldman Sachs analysts recently did a deep dive on venting/flaring activity in the Permian and expect more infrastructure to alleviate the problem -- but it will take time.
“Our analysis of Permian flaring activity identifies 0.6 Bcf/d of potential production that could be recovered as new pipeline capacity comes into service,” said Goldman analysts led by Damien Courvalin.
“Granular daily flaring data suggests that 0.15 Bcf/d of this potential production has so far come online, with the rest set to support marketed production growth in coming months.”
Goldman’s activity tracker corroborates commentary by Apache Corp., which last summer restarted 0.25 Bcf/d of shut-in Alpine High production as the 2 Bcf/d Gulf Coast Express (GCX) pipeline began to flow. GCX ramped in September.
Permian gas production is difficult to track given the intrastate nature of offtake pipelines, Courvalin noted, but it should be increasing in the coming weeks as local pipeline maintenance also comes to an end.
“This also suggests that the recent pattern of higher than expected weekly storage injections could be due to underestimated Permian output,” he said.
Beyond the potential underestimated volumes, Goldman analysts said 1.15 Bcf/d of supply growth needs to come from new wells to meet their forecast that Permian production will increase by 2.0 Bcf/d into next year, enabled by GCX.