The next wave of Permian crude oil pipeline infrastructure is getting completed as we speak. In West Texas, several new pipeline projects are either finalizing their commercial terms and agreements, wrapping up the permitting process, or actually putting steel in the ground. In the Permian alone, there is a potential for 4.3 MMb/d of new pipeline takeaway capacity to get built in the next two and a half years. Along with those major long-haul pipelines, there are also crude gathering systems being developed to help move production from the wellhead to an intermediary point along one of the big new takeaway pipes. While we often like to give pipeline projects concrete timelines with hard-and-fast online dates, the actual logistics of how producers, traders and midstream companies all bring a pipeline from linefill to full commercial service are never clean and simple. There can be a lot of headaches, learning curves, and expensive — not to mention time-consuming — problem-solving exercises that come with the start-up process. In today’s blog, we discuss why new pipelines often experience growing pains, and how market participants navigate the early days of new systems.
Over the past few months, we’ve written extensively about the number of new pipeline projects in the Permian that are either under development or have passed the final investment decision (FID) threshold and are currently under construction. On the long-haul side of things, those new pipelines are creating much-needed space for producers and marketers to access refining and export markets all along the Gulf Coast, from Corpus Christi to Nederland in Texas and farther east in Louisiana. There are six new Permian-related projects in various stages of completion that have the potential to add over 4.3 MMb/d of new takeaway capacity by the end of 2021. Almost every major midstream player in the country is developing — or has co-signed onto — a massive new pipeline project. In the next few months, we’ll see the first of the greenfield projects materialize, as Plains All American brings online its 670-Mb/d Cactus II system (dashed-red line in Figure 1). We understand that linefill is currently under way on the new pipe and that commercial operations are expected to begin shortly. Big projects like Cactus II, EPIC and the others shown in Figure 1 have been marketed to producers and traders as the best option for reaching expanding export markets, with the ability to also batch different types of crude qualities and enhance the value for a possible sale to a downstream refiner.
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