The significant rise in Permian production of oil, natural gas, and natural gas liquids (NGLs) over the past decade is well-documented. However, since last summer, Permian hydrocarbon production appears to have plateaued. According to recent data from the Energy Information Administration (EIA), crude oil production increased to approximately 6.0 million barrels per day (BPD) in August 2023 and has since fluctuated between 6.0 and 6.2 million BPD. Similarly, raw gas production, including NGL-rich wet gas, rose rapidly to 25.2 billion cubic feet per day (Bcf/d) by the end of 2023, but has since declined and stabilized around 25 Bcf/d as of May 2024.

Several factors contribute to this current plateau in Permian hydrocarbon production. While exploration and production (E&P) companies have shown impressive capital discipline despite strong oil prices, this alone does not fully explain the production hiatus. Upstream consolidation in the Permian has also reduced drilling activity, as acquiring companies rationalize capital expenditures following mergers and acquisitions. However, the most significant impact on hydrocarbon growth in the Permian has been the availability of gas takeaway capacity.

Permian gas midstream lags natural gas production

The magnitude of hydrocarbon growth in the Permian over the last five years has challenged midstream companies to keep pace with gas production (See below). If producers cannot transport natural gas, they cannot increase oil and NGL production, even though there is spare capacity on pipelines for crude and NGLs.