Permian crude oil production continues to march steadily upward, headed toward 3.0 MMb/d sometime in the next few months. Most of the recent growth responsible for pushing total U.S. output past 10 MMb/d has come from increases in Permian volumes. Pipeline capacity out of the super-hot play is on the ragged edge of maxing out, and a myriad of new projects to relieve capacity constraints are in the works. Why then has the price differential between Midland, TX, and the Gulf Coast dropped over the past few weeks? Why did the Brent vs. WTI/Cushing spread crater? And what does this all mean for Midland-to-Gulf Coast transport deals getting struck for $2.00/bbl or less? Today, we look at these developments, try to make sense out of the Permian/Midland crude oil market, and consider what the future might hold for West Texas barrels moving to the Gulf Coast.
We’ve talked frequently about increases in Permian crude oil production and the need for new pipeline takeaway capacity here in the RBN blogosphere. In December (2017), we detailed the latest wave of Permian pipeline projects in Help on The Way, including briefs on the planned Phillips 66/Enbridge Gray Oak Pipeline; Magellan Midstream Partners’ plan to build a set of connecting pipes between Midland, Corpus Christi and Houston; an expansion of the Magellan/Plains All American BridgeTex Pipeline from Midland to Houston; and the latest from Enterprise Products Partners: the planned conversion of one of its NGL pipes out of the Permian to crude service, also targeting Houston. Through all of this, Enterprise continues to ramp up volumes on its Midland-to-Sealy pipeline, which is said to be flowing more than 200 Mb/d with expectations to hit its 450-Mb/d full volume by June. Also, EPIC is said to be laying pipe for its 550-Mb/d, 700-mile line from the Permian and Eagle Ford to Corpus Christi, and Plains announced the 585-Mb/d Cactus II pipeline from West Texas’s Orla, Wink South, Midland, Crane and McCamey points down to Corpus Christi.
The RBN Exports Analytic Suite provides insider access to all of RBN’s exports analysis. This suite offers 3 weekly subscription reports, including Crude Voyager, LNG Voyager, and NGL Voyager.
And the announcements keep on coming. Two weeks ago, Trafigura signed a long-term commitment with Plains to move 300 Mb/d of Permian crude to Corpus on Cactus II. We understand that this brings the Singapore-based global commodity trading company to 450 Mb/d of outbound capacity, making it the largest holder of takeaway out of the Permian. The capacity provides Trafigura with direct access to export dock capacity and the two 50-Mb/d condensate splitters at Corpus, where the trading company holds 100% of the capacity on units operated by Buckeye Partners and Magellan. We don’t know the transport rate on that deal, but if announcements from Magellan and Plains for their new capacity on BridgeTex are any indication, the market for transport capacity from Midland to Houston is sub-$2.00/bbl. A January 30 (2018) BridgeTex press release indicated that 10-40 Mb/d from Midland to East Houston is going for $2.10/bbl, while the same volume from Colorado City, TX, to East Houston is priced at $1.85/bbl. We’ve heard numbers for capacity out of the Permian lower than that being talked about and done. For example, we understand that Chevron has taken out capacity on Enterprise’s Midland-to-Sealy line at something well below $2.00/bbl for a term of 15 years, which Chevron will need, given that it has announced it will be increasing its Permian rig count by 25% — to 20 from the current 16 — over the coming months. And there’s talk of other projects offering Permian-to-Gulf Coast transport for $1.50/bbl or even lower. Clearly, there is a lot of competition among pipeline projects for locked-in Permian barrels these days.
Join Backstage Pass to Read Full Article
About the song
"We Gotta Get Out of This Place" was written by the husband/wife songwriting team of Barry Mann and Cynthia Weil. It was originally intended for The Righteous Brothers to cover, but when Barry Mann got a solo recording deal with Red Bird Records, they wanted him to release it first. That didn’t happen –– a demo made its way to English hit record producer Mickie Most, and he immediately recorded it with The Animals, who released it in July 1965, beating Mann to the punch. The song reached #13 on the U.S. pop singles chart, and #2 on the UK pop singles chart, whose #1 position was held by The Beatles with "Help!"
“We Gotta Get Out of This Place” appears on the album Animal Tracks, which The Animals released in the fall of 1965. It is also included in the hits collection Best of The Animals, released in 1966. The song begins with a bass intro by Animals bassist Chas Chandler, who would later go on to be the man who discovered, managed and produced Jimi Hendrix. "We Gotta Get Out of This Place" became a favorite song at high school graduations and proms, and would become hugely popular with American G.I.s serving in the Vietnam War.
Scores of artists have covered "We Gotta Get Out of This Place" over the years. At the 2012 SXSW Festival in Austin, TX, Bruce Springsteen recited the lyrics to the song at his keynote speech, stating "that's every song I've ever written" in testimony to the tune’s power.
The Animals were formed in Newcastle, England, in the early 1960s. They hit it big with the release of their second single, "House Of the Rising Sun," which went to the top of the charts in June 1964. Eric Burden has always been the vocalist with the band, with various members drifting in and out. The version of The Animals on this recording was the longest lasting and most popular. Then, they consisted of Eric Burden (vocals), Chas Chandler (bass), Hilton Valentine (guitar), John Steel (drums) and Dave Rowberry (organ).
The Animals recorded 13 studio albums over the years. The group was inducted into the Rock & Roll Hall of Fame in 1994. "We Gotta Get Out of This Place" ranked #233 on Rolling Stone Magazine's 500 Greatest Songs of All Time. Eric Burden and The Animals’ guitarist Hilton Valentine still tour and play individually. Chas Chandler passed away in 1996. Jimi Hendrix's last public performance was playing guitar with his friend Eric Burden & War at Ronnie Scott's Jazz Club in London, jamming on the tune "Tobacco Road."
