By Mitch Borden
In late April, the oil and gas company Apache Corporation announced it’s hitting the brakes on its natural gas operations in an area the company’s been developing at the southern edge of the Permian Basin called the Alpine High.
This comes at a time when there is not enough pipeline capacity to transport the large volumes of gas being produced in West Texas to market, which is leading to low prices.
In a press release, Apache stated the deferrals would reduce its daily gas production by approximately 250 million cubic feet of gas a day. Apache declined to further comment on its announcement.
Steve Hendrickson, president of Ralph E. Davis Associates, a petroleum engineering and geoscience firm, on the other hand, said this amount represents the majority of the companies gas production in the Alpine High.
“I won’t say all, but I would say 80 to 90 percent is what it looks like from the data I have.”
Apache’s announcement surprised Hendrickson at first, but he said it does make sense. Recently, the price of West Texas natural gas bottomed out and fell into the negatives.
Hendrickson explained, “Now we’ve had situations lately, where operators are faced with the choice of flaring the gas or paying for it to be taken away.
Instead of burning it or paying to transport it, he said, Apache is choosing to wait out the market by closing down its gas rigs until prices improve.
The price of natural gas is expected to improve for Permian Basin producers later this year when more pipelines are built. That could mean, Hendrickson said, it could be months before Apache restarts its gas operations.