Oklahoma Borderline, Part 2 - Processing Plants, Pipelines Planned to Keep Pace with Gas Growth

Increasing production of NGL-packed associated gas in the adjoining SCOOP, STACK and Merge plays in central Oklahoma and rising interest in the Arkoma Woodford play in the southeastern part of the state are spurring a bevy of natural gas-related infrastructure projects. New gas-gathering systems are being developed, new gas processing capacity has come online, and at least another 1.1 Bcf/d of processing capacity is under construction or will be soon. To help bring all the resulting gas and NGLs to market, new takeaway pipeline capacity out of Oklahoma is being planned too. Today, we continue our review of ongoing efforts to add gas-processing and takeaway capacity in the hottest parts of the Sooner State.

As we said in Part 1, crude oil and natural gas production in Oklahoma have fully rebounded from the declines that followed the 2014-15 collapse in oil prices and stand at 21st-century highs. The center of most drilling activity in the state has been in the Cana-Woodford region, which includes the SCOOP, STACK and Merge plays. SCOOP/STACK/Merge primarily targets crude oil, natural gas liquids (NGLs) and condensates in the Woodford and Meramec formations of the Anadarko Basin, but with them come significant volumes of associated natural gas. Since the start of 2017, crude production in the Cana-Woodford has increased 27% and gas production is up 24% — to 280 Mb/d and 3.7 Bcf/d, respectively, in March 2018, according to our friends at PointLogic. More recently, a few producers (many of them backed by private equity) have been talking up the gas-focused Arkoma Woodford — sometimes referred to as Arkoma STACK. Arkoma Woodford gas production in the first three months of 2018 averaged 1.5 Bcf/d — up 250 MMcf/d from the same period in 2017 and the highest output for the play in more than five years.

All that growth is putting additional pressure on the state’s existing pipelines and gas-processing infrastructure and resulting in increased activity among midstream companies. Last time, we discussed a number of recently completed projects, including extensions of two crude pipelines to the oil storage and distribution hub in Cushing (in eastern Oklahoma): one a new, 50-mile Glass Mountain Pipeline spur into the heart of STACK, and the other a 35-mile extension of the STACK Pipeline to allow the receipt of oil from additional parts of that play. We also noted the early-March (2018) completion of a 45-mile crude oil pipeline alongside Velocity Midstream Partners’ existing Central Oklahoma Pipeline, which transports condensate through the fairway of SCOOP, and the April start-up of a 22-mile extension that links the core of the Merge play to Velocity’s system. The one recently completed gas project we discussed was SemGroup Corp.’s 50-mile Canton Pipeline from Blaine County (in the STACK play) to the company’s Rose Valley gas processing plant in Woods County; the pipe came online in late December 2017.