Market Solution: New Pipeline Capacity Dwarfs Flared Gas Volumes in the Permian
Thu, February 28, 2019
Recent media reports have called attention to flaring levels in the Permian as production has increased, with one environmental group even suggesting that the market can’t solve the issue. But the new pipeline capacity being added over the next few years appears to contradict that claim.
Increasing natural gas pipeline capacity out of the Permian represents a major economic opportunity, and companies are responding to that opportunity with multi-billion-dollar investments. A TNG review found an estimated 14 billion cubic feet per day (Bcf/d) in additional natural gas pipeline capacity set to come online in the Permian by the end of 2022. This equates to more than five trillion cubic feet of natural gas annually.
That proposed capacity is about 93 times larger than the current flaring levels, according to data from the Texas Railroad Commission.
Benefits of Pipelines
Building out this new pipeline capacity has benefits beyond mitigating flaring.
Pipelines are critical for the future of the Texas economy. While the state is home to over 440,000 miles of pipeline already, more are needed to keep the Texas energy boom going, as the Lone Star State continues to break record after record for oil and gas production – especially in the Permian.
Along with carrying the oil and natural gas that fuel our economy, pipelines themselves provide significant economic benefits. It is estimated that additional Texas pipeline development could support an average of 171,000 jobs per year, with one report concluding that pipelines generate over $1.6 billion in annual state and local tax revenue in Texas.
Pipelines not only play a crucial role in facilitating the growth of Texas energy development, they are also responsible for safely and efficiently delivering the resources we rely on every day. Natural gas is currently the largest source of power in the United States, accounting for 35 percent of our power mix nationally, with that reliance expected to increase to 37 percent in 2020. Additional pipeline capacity will ensure that Texas natural gas makes its way to power plants and other consumers.
Finally, as oil and natural gas production soars, pipelines are helping Texas strengthen its position as an energy exporter. Over the past few months, several new liquefied natural gas (LNG) export facilities have opened or been approved along the Gulf Coast, and with Texas crude export records being broken left and right, new pipelines are necessary to supply these facilities and make sure reliable shipments of U.S. oil and natural gas reach our trading partners abroad.
Flaring is a regulated part of oil and gas development. Used for safety purposes, flaring is also often performed to comply with air quality regulations. Delays in natural gas pipeline approvals have forced operators to vent or flare excess gas that could otherwise be delivered to market.
The good news is that new pipeline capacity set to come online over the next few years will dwarf the volume of gas currently being flared in the Permian, providing a mechanism for that gas to get to market, while also generating significant economic benefits for Texas and indeed the entire United States.