Daily Energy Blog

Rising crude oil production in the Permian and the desire of many producers to get that oil to refineries and marine terminals in Corpus Christi has spurred interest in developing more than 1 million barrels/day (MMb/d) of new Permian-to-Corpus pipeline capacity by 2019. That raises the question of whether the Sparkling City by the Sea is prepared to receive and store all that crude — plus oil from the rebounding Eagle Ford play — and either refine it or load it onto ships. Today we begin a blog series on the potential flood of crude oil from the Permian’s Delaware and Midland basins into South Texas’s largest port and refining center, and how refiners and midstream companies are planning to deal with it.

For the first time ever, a Very Large Crude Carrier (VLCC) carrying Bakken crude has sailed from the Gulf of Mexico to Asia, and more may follow. With the startup of the Dakota Access Pipeline set for June 1, Bakken producers are only days away from gaining easier, cheaper pipeline access to the Gulf Coast, and are looking for new markets. Asian refineries are willing to pay a premium for Bakken-type crudes, and want other types of U.S. crude as well. And every 18 hours or so, a VLCC arrives at the Louisiana Offshore Oil Port—the only U.S. port capable of handling the mammoth vessels—offloads crude and leaves LOOP empty because the port is currently an import-only facility. Today we consider the potential for transporting more light, sweet crude to Asian refineries on VLCCs, either via ship-to-ship transfers or by reworking LOOP to enable exports.

Permian crude oil production and pipeline takeaway capacity out of the region are in a horse race —it’s a close one too, and the stakes are high. Twice in the past few years, Permian production growth has outpaced the midstream sector’s ability to transport crude to market, resulting in negative price differentials that cost many producers big-time. Now, thanks to increased drilling activity and producers’ heightened ability to wring more out of the play’s multistack formations, Permian production is expected to rise by at least another 1.5 million barrels/day (MMb/d) by 2022 —a 60%-plus gain over five years —raising the threat of another round of major price hits, maybe as soon as later this year. Today we continue a blog series on the challenges posed by rapid production gains in the hottest U.S. shale play.

The highly attractive production economics of the Permian’s multistacked, hydrocarbon-packed Delaware and Midland basins all but guarantee that the region’s output of crude oil, natural gas and natural gas liquids will continue rising—possibly at an even faster rate than what we’ve seen lately. That raises an all-important question: Will there be sufficient pipeline takeaway capacity in place to keep pace with all that growth? If there isn’t, some Permian producers will suffer from downward pressure on local prices—and that may cause them to have second thoughts about the big bucks they paid to gain access to the best Permian acreage in the first place. A production-growth forecast and a deep-dive assessment of existing and planned pipeline takeaway capacity are at the heart of RBN’s new Drill Down Report on the Permian. Today we provide highlights from the new report.