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Have It All, Part 5 - Delek US's Crude Oil Gathering System in the Midland Basin

Crude oil gathering systems do just that — they gather crude from multiple well sites — but the drivers behind their initial development can vary widely. Some gathering systems are developed by oil producers to reduce their use of trucks and more efficiently transport increasing volumes of crude from the lease to takeaway pipelines. Others are the brainchildren of savvy midstream companies that see an opportunity to serve multiple producers in a fast-growing production area. And then there are systems like the one refiner Delek US is now expanding in the Permian’s Midland Basin near the company’s Big Spring, TX, refinery. It’s designed to feed locally produced crude directly to that refinery — and possibly other Delek refineries too — and may potentially be used to help fill a long-haul takeaway pipeline that Delek still hopes to co-develop with partners. Today, we continue our series on Permian gathering systems with a look at Delek’s 200-mile Big Spring project, part of which is already up and running.

We’re now five episodes into our review of major crude oil gathering systems in the Permian, and it’s already clear that while they all gather crude in relatively small-diameter pipes — mostly 4 to 16 inches — these systems can be as different as Fleetwood Mac’s late-1960s British blues and mid-‘70s American folk rock eras, or The Beatles on “The Ed Sullivan Show” in 1964 versus on LSD a year or two later. In Part 1, 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 Midland Basin to serve Concho and other producers. In Part 2, we focused on 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 a number of expansions to serve other producers too. 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, all of which are zeroed in (at least initially) on serving Matador Resources (part-owner of San Mateo Midstream). And in Part 4, we turned to Medallion Midstream’s fast-growing, 1,000-mile crude oil gathering/header system in the Midland (which provides access to firm shippers serving 20 producers) and its 116-mile Delaware Express gathering/shuttle system in the southern Delaware.

Today, it’s Delek US’s turn. Delek is a mid-size refiner based in Brentwood, TN — also home to Dolly Parton and a number of other country music stars. The company owns and operates four refineries: El Dorado, AR (capacity, 80 Mb/d); Tyler, TX (75 Mb/d), Krotz Springs, LA (74 Mb/d), and Big Spring, TX (73 Mb/d). For many years now, the El Dorado refinery has been receiving a portion of its crude oil needs from Delek’s 600-mile SALA gathering system in southern Arkansas and Louisiana; that system in 2018 transported more than 16 Mb/d, on average, most of it to the El Dorado refinery. Since early 2018, Delek has been developing an approximately 200-mile gathering system in the Midland Basin. The first elements of that $210 million system were completed in the second half of 2018 and have been in service for several months. The rest is under construction and expected to be finished this summer. The system’s initial throughput capacity is 150 Mb/d; with the ongoing build-out, that will double to 300 Mb/d.

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