Permian Basin Poised to Overtake Marcellus as Top US Gas Producer

The Permian Basin is expected to surpass the Marcellus shale region as the top natural gas producer in the US by the end of this decade, according to Citigroup Inc. analysts. The Permian, spanning West Texas and Southeast New Mexico, has long been the most productive oil shale field and is now poised to lead in gas output, a shift that would alter US gas market dynamics.

Unlike the Marcellus, where production is sensitive to gas supply and demand, the Permian's gas output is largely a byproduct of oil drilling. The economics of production in the Permian are driven by oil prices, making gas a sometimes unwanted side effect. Citi analyst Scott Gruber noted that the Permian could take the lead in gas production as soon as 2030, though the timeline depends on oil price trends.

This year, gas prices in the Permian turned negative for four months due to oversupply and limited pipeline capacity. Some producers temporarily shut down wells with high gas-to-oil ratios to avoid losses. However, new pipeline projects in Texas are expected to ease these issues once completed.

The rise of the Permian as a gas producer may reduce the need for other gas-heavy regions like the Haynesville Basin to ramp up production. Increased gas supply from the Permian could also moderate long-term gas price increases, as new LNG export terminals and data centers drive demand.