Reflecting on oilfield history as a whole, it wasn’t all that long ago that natural gas was treated more like a nuisance than a commodity, either an undesirable byproduct of an oil discovery or a letdown when it was encountered in a well instead of the targeted black gold.
It can complicate things when an operator is drilling for oil, especially during periods like now when crude prices are robust, but gas prices aren’t. Additionally, when oil is discovered, it often comes with associated natural gas. When producers turn the taps to get that oil into sales lines, the gas can be problematic if the limited takeaway capacity for transporting it is already stretched.
This is the current situation for many operators in the prolific Permian Basin of west Texas and south-east New Mexico.
Infrastructure constraints to ship natural gas out of the Permian combined with high storage levels due to a relatively mild winter are wreaking natural gas pricing in the region. Natural gas prices at the WAHA hub located near Fort Stockton, Texas, were below zero—negative $4.60/MMBtu as recently early May.
Not only did that mean that produced gas in the region was basically free, but the negative price also meant producers trying to move gas out of the region would have to pay someone extra to do it.
