Have It All, Part 4 - Medallion's Midland Crude Oil Header System and Delaware Express Shuttle

Crude oil gathering systems are, by their very nature, growing and evolving things, especially in super-hot shale plays like the Permian. These systems typically sprout when economics and the expectation of growing production support the development of small-diameter pipeline networks to transport crude from the lease to takeaway pipes — reducing the need for truck deliveries in the process. They then are organically extended as drilling-and-completion activity expands into nearby areas. Over time, some crude gathering systems grow so large — and are so well interconnected with takeaway pipelines — that they become intra-basin header systems that allow shippers to move crude to many interconnection points, thereby providing the highest level of destination optionality. Today, we look at one such highly evolved gathering system — Medallion Midstream’s gathering/header network in the Midland Basin — and at other Medallion pipes that gather Delaware Basin crude oil.

This is the fourth episode in our series on Permian crude gathering systems. In Part 1, we made the case that while crude gathering systems, with their smaller-bore pipes and lower capacities, might at first glance seem like secondary players in the midstream space, they actually play significant roles in reducing transportation costs and maximizing producer and shipper profits. We noted that successfully developing gathering systems requires a keen understanding of three key factors: lining up producer commitments, providing takeaway optionality, and minimizing the total cost of moving crude from the lease to the Gulf Coast, Cushing or other destinations. And we discussed the newly announced Beta Crude Connector, a 100-mile-plus, 150-Mb/d gathering system that a joint venture of Concho Resources and Frontier Energy Services is developing in the heart of the Midland Basin. In Part 2, we discussed another Midland-area system: Reliance Gathering’s 185-Mb/d pipeline network, which was originally developed to serve the affiliated producer Reliance Energy, but which has since undergone expansions to serve a number of other producers. And in Part 3, we looked at San Mateo Midstream’s crude gathering systems in the Delaware Basin — one in Eddy County, NM, and the other in Loving County, TX — and its plans for two new systems on the New Mexico side of the state line.

Today, we look at (1) Medallion Midstream’s Midland crude oil gathering/header system (green lines in upper inset map in Figure 1) in the Midland Basin and (2) its Delaware Express gathering/shuttle system (yellow lines in lower inset map), which gathers crude in the southern Delaware Basin and transports it to Crane, TX, and the Midland system. We should note up front that while Medallion’s management holds ownership interests in both the Midland and Delaware Express systems, the balance of Medallion Pipeline Co. (MPC; owner of the Midland system) is held by Global Infrastructure Partners (GIP) and the balance of Medallion Delaware Express (MDE; owner of the Delaware Express system) is held by Energy Mineral Group (EMG).

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