Permian Basin gas production hits new high, facilitated by new Matterhorn pipeline

Flows on the new Matterhorn Express Pipeline into interstate lines have stabilized at around 600 MMcf/d and facilitated a significant increase in natural gas production in the Permian Basin.

Matterhorn began delivering gas into interstate pipelines Oct. 1. Flows have been reasonably steady since then, delivering around 400 MMcf/d into the Transcontinental Pipeline and 200 MMcf/d into Texas Eastern Transmission during Oct. 1-9, data compiled by S&P Global Commodity Insights showed.

Natural Gas Pipeline of America also has a receipt point for Matterhorn, but so far no gas has flowed into it, the data showed.

Total flows on the pipeline could be higher than this. As an intrastate pipeline, Matterhorn does not have an obligation to post gas flows data. Some gas has been flowing on Matterhorn since at least the start of September.

Production impact

The extra egress capacity from the 2.5 Bcf/d pipeline, which runs from the Permian Basin in West Texas to Katy near Houston, appears to have already boosted natural gas production. Modeled dry gas production in the Permian hit a record high of 20.6 Bcf/d on Oct. 5, easing to 20.4 Bcf/d on Oct. 7, according to Commodity Insights data. It has averaged 20.4 Bcf/d Oct. 1-9, around 500 MMcf/d higher than average output in September, the data showed.

Limited takeaway capacity and the resulting low cash prices were seen as limiting production growth in 2024, although some midstream firms argued processing capacity was the bigger bottleneck.

Cash prices at Waha were mostly negative throughout March-August, with pipeline maintenances often causing extreme downward spikes, but they recovered significantly after Matterhorn started flowing gas. The Platts Waha spot price was consistently above zero Sept. 13 - Oct. 8, although it fell back to negative territory for Oct. 9 flows, Platts data showed. Platts is part of Commodity Insights.

The low prices incentivized strong ethane recovery in the Permian Basin this summer, a trend that could reverse this month. "The first operation of the Matterhorn pipeline in Texas is expected to deflate the high Permian Basin ethane frac spread and reduce overall ethane recovery in October," Commodity Insights NGLs analysts wrote Oct. 7.

More pipelines out of the Permian are planned as market participants expect Matterhorn to fill by 2026. The Blackcomb intrastate project has already reached FID and is targeting a 2026 start date. Meanwhile, Energy Transfer continues to pursue the greenfield Warrior pipeline, and Kinder Morgan is still considering a brownfield expansion of Gulf Coast Express, first suggested in 2022.