40 Miles from Denver, Part 3 - Crude Quality Drives Build-Out of Taproot's D-J Basin Gathering System

Crude oil gathering systems play an important role in a matter critical to producers, marketers and refiners alike: crude quality. Well-designed gathering systems can help deliver crude with the API gravity and other characteristics that refiners desire and are willing to pay a premium for. This has become a particularly big deal in the Denver-Julesburg Basin, where a big expansion of gathering capacity is under way, and where the market gives extra value to “Niobrara-spec” crude with an API of 42 degrees or lower. Today, we continue a series on existing and planned pipeline networks to move D-J-sourced crude from the lease to regional hubs and takeaway pipes with a look at Taproot Energy Partners’ system.

As we said in Part 1 of this series, the D-J Basin in northeastern Colorado and southeastern Wyoming offers an unusually intense concentration of hydrocarbons within four geologic layers, or “benches,” only a few thousand feet below the surface, as well as low per-well drilling costs and direct pipeline access to the crude oil hub in Cushing, OK. We also pointed out that D-J crude production has doubled in the past 18 months to about 640 Mb/d, spurring the development of a number of new gathering systems, as well as the expansion of existing infrastructure. The vast majority of the D-J’s production growth is occurring in Weld County, CO, so that’s understandably the epicenter of midstream activity as well. In Part 1, we discussed the sprawling Black Diamond crude gathering system in Weld County that is co-owned by Noble Midstream Partners and Greenfield Midstream, and in Part 2, we reviewed Noble Midstream’s nearby Wells Ranch, East Pony, Greeley Crescent and Mustang systems.

Today, we shift our spotlight to Taproot Energy Partners’ existing Baja gathering system (blue line in Figure 1) and planned Rattlesnake Extension (dashed yellow line) in central Weld County, both of which are designed to transport crude to Tallgrass Energy’s Buckingham Terminal (orange square to center-right) and the Pony Express Pipeline (green line) to the crude oil hub in Cushing, OK. As we’ll get to in a moment, Buckingham has emerged as a premium market for D-J-sourced crude — more specifically, for Niobrara-spec crude with a lower API than most of the other oil produced in the basin.

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