Permian Shale Producers Warn of Natural Gas Takeaway Constraints

HOUSTON (Reuters) — U.S. oil and gas producers Diamondback Energy and ConocoPhillips said on Tuesday the top U.S. shale field will face natural gas pipeline constraints as production grows and companies strive to reduce flaring.

While other U.S. oilfields are seeing production plateau, the nation's largest in the Permian Basin in West Texas and New Mexico is anticipated to continue to grow because of its low cost of output. The Permian's cost of production "is the lowest in the world right now," Tim Leach, a Conoco executive vice president, told the World Petroleum Congress in Houston.

Scott Sheffield, chief executive of top U.S. shale producer Pioneer Natural Resources Co., said the cost of production in the Permian has halved to $30 a barrel since 2014.

At the same time, operators are under pressure by investors and government regulators to reduce the flaring of excess natural gas, they said. Gas is less lucrative than oil and producers will flare, or burn it off, to get more oil.

"You don’t have a seat at the table today if you don’t have very aggressive environmental objectives," said Travis Stice, CEO of Permian producer Diamondback Energy, referring to investor concerns about emissions.

In 2019, producers across the Permian Basin flared and vented 293 billion cubic feet of gas. Flaring has declined with pandemic cutbacks and as companies implement reduction measures, according to consultancy Rystad Energy.

"We’re all testing the latest surface sensor, methane sensors… we’re doing flyovers, were using satellite data," said Pioneer Natural Resources' Sheffield, describing emissions countermeasures. 

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