The biggest oil play in the United States is the Permian, located in West Texas and southeastern New Mexico. Two weeks ago MDN warned readers that natural gas in the Permian, which is a byproduct of the oil wells drilled there, is increasingly competing with Marcellus/Utica gas (see “Free” NatGas in Texas Permian Changes Shale Gas Economics in M-U). The coming clash continues to grow. In a Bloomberg article published yesterday, we learn that the price of natgas in the Permian at major trading hubs is now lower than the price for hubs around the Marcellus/Utica, which is truly a first! We also get an ominous prediction from an analyst who watches these things, who said in the next three to four weeks, “natural gas prices in the Permian can go to zero because it’s literally a byproduct.” Free gas! As we pointed out in our previous post on Permian and gas prices, oil drillers can actually pay up to $2.36 per thousand cubic feet to dispose of the natgas coming out of Permian oil wells. That is, they can pay people to take the gas–as a cost of extracting the oil. Roughly one-third of the hydrocarbons coming from Permian wells is natgas. The biggest problem in the Permian for natgas is also the biggest problem in the M-U: lack of pipelines…
