After years of aggressive development, the Permian is entering a more tempered growth phase as producers recalibrate activity in response to lower oil prices and shifting company priorities. The change will lead to a departure from the norm for the basin's natural gas.
Despite natural gas accounting for over 20% of total production (as measured on a boe basis), FANG reported that gas sales make up less than 1% of its total revenue from customer contracts. This does not translate into strong growth prospects for gas-directed development.
In terms of gas pipeline infrastructure, current Permian gas production already exceeds total effective egress capacity, leading to an estimated flaring balance of nearly 0.5 Bcf/d in 2025 in East Daley Analytics’ latest Permian Supply & Demand model. While this highlights the urgency for additional takeaway, a potential overcorrection looms.
We expect ~4.5 Bcf/d of new pipeline capacity to come online by early 2027 connecting Permian supply to Gulf Coast demand centers. However, based on the lower WTI forward strip, East Daley does not forecast enough gas production growth to fill this capacity (see figure). This estimate does not include the recently proposed 2.4 Bcf/d Tallgrass Permian-to-REX connector.
To utilize this additional takeaway by 2030, the basin would require ~60 active rigs in the gassier windows beginning in 2026 — an impossible scenario under current market conditions stressing capital discipline. This sets up a near- to medium-term period of underutilized infrastructure and constrained economics for some midstream assets.
Looking ahead, market forces may provide relief. Oil prices have rebounded sharply in the last week after Israel launched missiles at Iran targeting the country’s nuclear program. It remains to be seen whether the gains will hold in crude, or if Permian producers opt to chase higher prices with increased drilling.
On the gas side, East Daley expects Waha basis to strengthen starting in 2027, driven by increasing Gulf Coast LNG demand. Although the anticipated price uplift may not be sufficient to prompt more gas-directed drilling, it could help producers recover sunk costs on firm transport agreements and improve profitability. See the Permian Supply & Demand Report for more information. – Oren Pilant Tickers: FANG.
Northeast Energy Path
Introducing Energy Path, the most advanced system for tracking commodities. Powered by Energy Data Studio, this new dashboard traces the journey of every molecule from the wellhead to final delivery in a single view — empowering you with real-time insights to optimize operations. Energy Path provides single-click access to oil, gas and NGL production volumes and operator data. The Northeast region is complete and ready to be your daily tool to understand Northeast operations. Schedule your demo of Energy Path!
NEW – The Burner Tip
The Burner Tip provides East Daley’s weekly coverage of natural gas markets. Every Thursday, The Burner Tip brings you our expert perspective on drivers shaping prices and flows in North America — including production trends, infrastructure dynamics, and forward-looking fundamentals — all grounded in EDA’s proprietary data and models. Whether you’re trading, investing, or managing risk, The Burner Tip delivers the insights you need to drive smarter strategy. Subscribe now to The Burner Tip!
Data Center Demand Monitor - Available Now!
Introducing Data Center Demand Monitor by East Daley Analytics. This is your go-to source for tracking data center projects and demand. We monitor and visualize nearly 300 US data center projects. Use Data Center Demand Monitor to forecast demand, identify pipeline corridors and track data center projects. — Request your demo now of the Data Center Demand Monitor!
The Daley Note
Subscribe to The Daley Note for energy insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.