Drill, Baby Drill is in the Ditch. Why Aren’t Producers Ramping Up Production Quickly?
- Timothy Beggans
- 2 days ago
- 2 min read
The Trump Administration’s energy industry motto has long been "Drill, Baby Drill!" But why aren’t Oil & Gas producers embracing the euphoria? Several factors are at play.
First, the global tariff war has injected too much uncertainty into the energy markets for long-term project planning. Second, rising steel prices are compressing margins for new production. And third, market dynamics are shifting—while global crude oil demand may have peaked, demand for natural gas and LNG is on the rise. The question remains: Is this a short-term trend or a seismic shift?
Natural Gas basis markets offer insight into this evolving landscape. Take the WAHA Basis market: the May prompt contract recently closed at -$4.1625 (discount to Henry Hub). Yet, the Matterhorn Express pipeline (2.5 BCF/D) commenced operations in Q4 2024. This suggests that physical supply at WAHA (Permian Basin) still exceeds pipeline takeaway capacity. The situation does not dramatically improve until the Blackfin pipeline (3.5 BCF/D, Q4 2025) and the Blackcomb pipeline (2.5 BCF/D, Q3 2026) come online. Blackfin aims to alleviate congestion in the Katy area and push more gas toward East Texas/Louisiana LNG facilities, while Blackcomb is designed to serve Brownsville LNG projects (Rio Grande and Texas LNG). Additionally, the Hugh Brinson pipeline (1.5 BCF/D, late 2026) will further enhance takeaway capacity.
However, this may be short-lived if LNG projects continue expanding under the energy-friendly Trump Administration. So, is the real challenge "Drill, Baby Drill" or "Build, Baby Build"? Industry leaders are prioritizing takeaway capacity over drilling acreage. This means the Administration must streamline the pipeline regulatory process to meet AI/Data Center/Hyperscaler/Semiconductor-driven natural gas demand. The next few years will redefine the power industry, and the natural gas sector must rise to the occasion. The key is all in the timing!
#OilAndGas #EnergyMarkets #NaturalGas #LNG #PipelineInfrastructure #DrillBabyDrill #BuildBabyBuild #PermianBasin #PowerIndustry
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