Permian crude production is headed to 1.7 MMb/d by the end of 2014. Current hot spots include the Delaware Basin in Northwest Texas and Southeast New Mexico. Two refiners with plants in West Texas and New Mexico are expanding their crude gathering systems to increase local crude processing. They are also looking to increase their toll revenue from crude flows out of the Delaware. Today we look at expanded refinery gathering systems in the Delaware Basin.
Recap
In Episode 1 of this series we reviewed crude prices and takeaway capacity in the booming Permian Basin. As soon as the new 300 Mb/d BridgeTex pipeline – a joint venture between Magellan Midstream and Occidental – comes online (now expected in June/July of this year) we can expect the Midland/LLS spread to narrow. In the meantime, the price spreads are generally too low to justify more expensive rail transport out of the Permian. In Episode 2 we provided an overview of mainline pipelines out of the Permian and the current centers of production activity and then started our survey of gathering systems with the new Cline Shale pipeline lateral expected online this month that will deliver up to 75 Mb/d of crude to the Centurion and BridgeTex pipelines in Colorado City. In Episode 3 we covered pipeline additions and expansions planned by Plains All American who own and operate the Basin pipeline that runs from Jal, NM through the Permian and delivers up to 450 Mb/d from Colorado City, TX to Cushing, OK. Plains are in the process of building extensions and expansions to increase the flow of crude to the Basin system as well as their latest project - the Cactus pipeline, due online in mid-2015 that will deliver Permian crude south to the Eagle Ford. In Episode 4 we covered gathering system developments to deliver new crude production in the Midland basin to Colorado City and Crane. In Episode 5 we covered new gathering systems designed to connect surging production in the Delaware Basin to takeaway capacity to Cushing and the Gulf Coast. This episode looks at how two refiners are expanding gathering systems in the Permian to supply their own and third party refineries.
Today’s episode of our series on crude gathering in the Permian describes new infrastructure being built to deliver booming crude production in the Delaware Basin to market. Production economics in Permian Basin shale plays are the focus of RBN’s latest drill-down report for our Backstage Pass subscribers – see the ad below for details.
Western Refining Inc
Western is an independent refining and marketing company that operates two refineries in the southwestern US at El Paso, TX (128 Mb/d) and Gallup, NM (25 Mb/d). In November 2013 the company purchased 38.7 percent of Northern Tier Energy that owns the 90 Mb/d St Paul Park refinery in St Paul, MN. Western Refining is the general partner that operates two Master Limited Partnerships (MLPs – see Masters of the Midstream), Western Refining Logistics and Northern Tier Energy, that operate transportation and terminal assets associated with the refineries including crude gathering. Western is considering a 25 Mb/d expansion to its El Paso refinery that is ideally located at the edge of the Delaware Basin in West Texas.
The El Paso refinery has historically been supplied with West Texas Intermediate (WTI) crude from the Midland Basin via the Kinder Morgan Wink to El Paso pipeline (recently expanded to 150 Mb/d). Over the past two years, Western has built out a gathering network in the Delaware Basin to take advantage of rapidly growing local crude production in the Bone Springs and Avalon plays. Western can now supply up to 138 Mb/d of WTI grade crude via a gathering system comprised of a 100 Mb/d pipeline and a 38 Mb/d truck unloading facility that delivers into the Kinder Morgan Wink pipeline. Figure #1 below shows the crude gathering system that includes the following components (referenced by the numbers in circles on the map):
Figure #1
