The Permian Basin is moving into a multi-year expansion phase for natural gas infrastructure that could ease the takeaway constraints that have long affected the region, according to Citi analysts.
The bank said the latest investment cycle differs from previous periods because infrastructure development is being supported by more durable sources of demand. Growing U.S. LNG exports and rising electricity requirements from AI data centers are encouraging the industry to commit capital earlier and on a larger scale.
Citi expects the Permian to eventually become the largest natural gas-producing basin in the U.S., adding to its existing position as the country’s leading oil-producing region.
New projects could ease Waha pricing pressure
Citi identified four recently announced projects as an important turning point for the Permian gas market. Alongside previously announced capacity additions and accelerating U.S. LNG exports, the projects are expected to reduce price differentials at the Waha Hub.
Improved takeaway capacity could also support the economics of oil-focused drilling in the Permian through 2030, as natural gas produced alongside crude becomes easier to transport to end markets.
Permian gas production increased from 17.2 billion cubic feet per day in 2021 to an estimated 27.6 bcf/d in 2025. Pipeline development did not keep pace with that growth, contributing to significant pricing dislocations at Waha during 2024 and 2025. Those conditions became more pronounced during the first half of 2026.
LNG and data centers support longer-term demand
U.S. LNG export volumes are expected to increase substantially through the end of the decade, providing an additional outlet for growing domestic gas production.
The U.S. Energy Information Administration’s August 2026 Short-Term Energy Outlook projects natural gas consumption by the power sector will reach a record 46.1 bcf/d during summer 2027. That would represent an increase of approximately 6% from levels recorded during the summers of 2025 and 2026.
Within ERCOT, natural gas-fired electricity generation is forecast to increase by roughly 22% between summer 2025 and summer 2027, driven largely by additional electricity demand from data centers.
Texas regulators paused approvals for new interconnections earlier this month, however, prompting the EIA to lower its estimate for 2027.
Permian producers expected to secure pipeline capacity
Citi expects Permian exploration and production companies to increasingly secure firm transportation capacity through equity ownership in pipelines and long-term contractual commitments.
The bank highlighted Devon Energy and Diamondback Energy (NASDAQ:FANG) through Solitude, as well as Exxon Mobil’s involvement with Targa Resources, as examples of this approach.
Securing capacity could give producers greater certainty over their ability to move associated natural gas out of the basin as production continues to expand.
Gas inventories build more slowly than expected
Gas-focused exploration and production stocks have gained approximately 4.4% over the past month, despite relatively little movement in forward natural gas strip prices and continued weakness in prompt-month pricing.
Citi’s storage supply-and-demand model also points to a somewhat tighter market than forecasts had suggested.
Actual inventory builds have consistently fallen below Citi’s expectations during the past month, with the shortfall averaging approximately 1.6 bcf/d.