New Mexico - The Sour-Gas-Related Infrastructure of the Booming Northern Delaware Basin

Enterprise Products Partners, already a leading provider of “well-to-water” or “well-to-market” midstream services out of the Permian, recently announced a deal to acquire private-equity-backed Piñon Midstream for $950 million in cash. But this isn’t just another bolt-on. Over the past few years, Piñon has been building out its one-of-a-kind Dark Horse system, which gathers and treats “sour” associated gas in a highly prolific, crude-oil-saturated part of the northern Delaware Basin and permanently sequesters the resulting hydrogen sulfide (H2S) and carbon dioxide (CO2) deep underground. In today’s RBN blog, we’ll discuss the impending Enterprise/Piñon acquisition, what Dark Horse does and how it gives Enterprise access to what may be the next hot production area in the Permian. 

The gas that emerges from wells in U.S. shale plays differs widely in its characteristics and quality. In the aptly named “dry” Marcellus in northeastern Pennsylvania, the gas is almost all methane, with only minute volumes of NGLs and contaminants, and requires minimal treatment before it’s fed into transmission pipelines. At the other end of the spectrum, the associated gas from a subset of crude-oil-focused wells in the Permian has high levels of hydrogen sulfide (a potentially deadly chemical) and carbon dioxide (a potent greenhouse gas), as well as a lot of NGLs. If the H2S level in the gas is relatively low, it can be removed from the gas stream onsite with a chemical “scavenger,” but higher levels of H2S quickly make that method prohibitively expensive. Another alternative, an onsite amine treatment facility, is more economical for removing higher levels of H2S — and it removes CO2 as well — but air permits typically limit how much can be flared off, requiring the costly and time-consuming development of acid-gas injection wells. Yet another, more centralized approach to dealing with H2S and CO2 — one that permanently stores large volumes of both deep underground — is being implemented over the next few weeks in southeastern New Mexico, as we discuss in today’s blog.

Some of the most prolific, crude-oil-saturated rock in the Permian’s Delaware Basin and Central Platform comes with a nasty complication — namely, associated gas with very high levels of hydrogen sulfide (H2S) and carbon dioxide (CO2). But rather than walking away from all those potential barrels, one midstream company saw the treatment of high-H2S, high-CO2 gas as a market niche worth pursuing. Backed by commitments from Black Bay Energy Capital and an area E&P, Piñon Midstream has been expanding a system in southeastern New Mexico that not only gathers the super-corrosive gas and removes almost all the H2S and CO2, it also permanently sequesters the stuff deep underground through a pair of 18,000-foot-deep, Class II injection wells. In today’s RBN blog, we will provide an update on Piñon’s Dark Horse Treating Facility and the company’s plan for a further build-out of its sour gas system.