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Have It All - Midstreamers Race to Expand Midland Basin Crude Oil Gathering Systems

Finally, after what seemed like a long period of crude oil pipeline takeaway constraints out of the Permian, significant new takeaway capacity is coming online this month. Just last week, Plains All American’s Cactus II pipeline from the Permian’s Midland Basin to the Corpus Christi area entered service. And on Monday, EPIC Midstream announced that it has begun interim crude service on its EPIC NGL Pipeline, which will move crude from the Permian’s Delaware and Midland basins — also to Corpus — until the company’s EPIC Crude Pipeline starts up in January 2020. With takeaway constraints alleviated, the focus on the crude-oil front now shifts to gathering system capacity, and it’s being added in spades. So much so that we’re writing two full Drill Down Reports (one on the Midland and one on the Delaware) to cover them in detail.  Today, we discuss highlights from the first of our new Drill Down Reports, which focuses on crude oil gathering systems in the fast-growing Midland Basin.

It’s a rare event to have two crude oil pipelines with a combined capacity of more than 1 MMb/d — and serving the same general area — commence operation within a few days of each other. But that’s what’s been happening in August with the start-up of the 670-Mb/d Cactus II and the beginning of crude service on the 24-inch-diameter EPIC NGL Pipeline, which EPIC Midstream says will be able to move up to 400 Mb/d of oil to Corpus. Things will only get better on the Permian takeaway front soon after New Year’s Day, when the even larger (590-Mb/d) EPIC Crude Pipeline enters service and EPIC NGL transitions back to NGL service.

As we’ve blogged about often, Permian crude oil production growth continued through 2018 and 2019 to date despite pipeline takeaway constraints that sometimes resulted in big price discounts for crude at Midland vs. Cushing and the Gulf Coast. According to RBN’s new weekly report, Crude Oil Permian, the sum of Permian-area refinery demand and pipeline takeaway capacity at long last exceeds Permian production, which suggests that big price differentials are a thing of the past, at least for a while. And it may be a long while at that, since still more crude takeaway capacity is under development and expected to be added in 2020 and beyond, as is new export-dock capacity in Corpus Christi, Houston and other port cities.

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