Connection – Enbridge’s Deal with Salt Creek Helps Connect Deeper to Permian Crude and Exports

Enbridge announced plans to buy Salt Creek Midstream’s crude-oil gathering business for $600 million on August 26. The deal includes full ownership of the Orla and Wink North systems and a 50% interest in the Delaware Crossing system, giving Enbridge a stronger connection to Permian production. From there, crude can move onto larger pipelines Enbridge has ownership of, such as Gray Oak or Cactus II, to Corpus Christi, then to the Enbridge Ingleside Energy Center (EIEC) for export. In today’s RBN blog, we’ll discuss how the deal strengthens Enbridge’s link between Permian production and Texas Gulf Coast export markets.

We’ll start with some background on Salt Creek Midstream, whose early growth was rooted in both natural gas and crude oil gathering. Although we discuss the company’s broader midstream buildout below, the Enbridge transaction includes only Salt Creek’s crude oil gathering business. As we noted in Happy Together, Salt Creek was formed in mid-2017 as a joint venture between Ares Management and ARM Energy. Ares provided the financial backing and investment platform, while ARM contributed midstream operating expertise. Salt Creek moved quickly to assemble a broader Delaware Basin midstream business, signing gas gathering dedications with five producers covering more than 175,000 acres by the end of 2017.

From the outset, the strategy extended beyond local gathering. Salt Creek secured capacity on Kinder Morgan’s El Paso Natural Gas Line 1600 to move Delaware gas toward Waha and western markets, became a minority partner in EPIC Midstream’s NGL pipeline, and contracted 150 Mb/d of capacity on EPIC Crude (see Flick of the Switch). It also developed gas, crude and produced-water gathering systems, giving producers a single provider for multiple services.

Salt Creek’s approach was distinctive because it linked its infrastructure to downstream markets without owning every piece of the chain. It used contracts, capacity rights and joint ventures to connect its gathering systems with major outlets. For crude (colored areas in Figure 1 below), that meant gathering and storage in the Delaware, a route to Wink, capacity on EPIC Crude (non-Enbridge owned and recently renamed Cactus III) and access to export-dock capacity at Corpus Christi. The result was a wellhead-to-water offering for its producer customers.