The start of new Permian gas pipeline expansions has materially improved Waha hub prices and bolstered drilling economics for producers. However, a review by East Daley finds capacity on crude oil pipelines is growing scarce to key downstream markets, a potential constraint on the basin’s next phase of growth.
Waha spot prices traded around $1.80/MMBtu late last week, a dramatic turnaround from the negative prices seen through most of 2026 as a result of the gas egress bottleneck. Negative gas prices have prompted some producers to shut-in wells and kept Permian drilling constrained despite higher WTI prices.
The gains at Waha have followed startup of the 570 MMcf/d compression expansion on Kinder Morgan’s (KMI) Gulf Coast Express Pipeline, as well as the partial start of Energy Transfer’s (ET) Hugh Brinson line. Waha is now trading about $4 higher since the start of June.
Additional gas capacity is expected in 4Q26 from the start of Blackcomb Pipeline and further construction on Hugh Brinson, followed by Eiger Express in mid-2028. The new pipelines come amid a bullish outlook for natural gas, including rising demand from data centers and LNG facilities, that could support stronger Permian gas growth.
However, because most Permian gas is produced alongside crude oil, limited crude takeaway capacity could ultimately become the more significant constraint on gas growth.
Using East Daley Analytics’ Production Scenario Tool, we developed a high-growth scenario to test when crude infrastructure could become the limiting factor.
Our base case forecasts Permian residue gas production will increase 13.5%, or roughly 3 Bcf/d from December 2026 through December 2028, while crude production grows 3.5%, or 242 Mb/d.
In the high case, we gradually add 35 more rigs in the Delaware and 20 rigs in the Midland basins, bringing the total Permian rig count to 314. This remains below the basin’s historical peak. Under this scenario, residue gas production grows 22.2% (~5 Bcf/d) while crude production increases 13.5% (934 Mb/d).
By January 2029, Permian crude production reaches ~7.9 MMb/d, effectively matching the basin’s estimated 7.89 MMb/d of nameplate long-haul takeaway capacity. Meanwhile, dry gas production reaches about 28 Bcf/d vs 31.5 Bcf/d of takeaway capacity. This suggests crude infrastructure could become the binding constraint on further Permian gas growth.
Based on the latest T-1 filings at the Texas Railroad Commission, crude pipelines bound for Corpus Christi, the premier destination for exports, were 99.7% utilized, while Houston-bound pipes were 91.7% utilized.
Most spare crude capacity out of the Permian is available on Cushing-bound pipelines like Basin, Sunrise and Centurion. This corridor was 68.2% utilized, according to the T-1 filings. However, Cushing normally trades at a discount to Gulf Coast destinations, so producers would need to accept lower prices to continue growing.
Investor Takeaway: Gas is becoming a growing opportunity for Permian producers, but even a modest increase in crude oil production will increase pressure on Permian takeaway infrastructure and renew interest in crude pipeline expansions. Corpus Christi appears to be the most likely corridor for future expansions. – Keland Rumsey Tickers: ET, KMI.
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