For evidence of America’s unwavering entrepreneurial spirit, look no further than smaller midstream companies that develop crude oil gathering systems in the Permian. These midstreamers — many of them backed by private equity — scramble to identify production areas on the cusp of needing gathering lines, propose systems to serve them, convince producers to dedicate acreage, then lay pipe, install tankage and get things up and running. All of this occurs in an atmosphere of intense competition. A number of new and growing crude gathering systems are under development today in southeastern New Mexico, an area that has experienced more than its share of production growth in the past couple of years. Today, we continue our series with a look at 3 Bear Energy’s Hat Mesa Oil Gathering System in the northern Delaware Basin, which was developed from scratch in Lea County and now serves 10 producers there.
It should come as no surprise that a blog series on Permian crude gathering systems would be an extensive one — there are so many to cover. We started in Part 1 with a look at the 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. Part 2 considered 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 discussed 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. 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. Part 5 focused on the 200-mile gathering system that refiner Delek US has been developing — also in the Midland — to deliver locally produced crude to Delek’s Big Spring, TX, refinery and others. In Part 6, we looked at the crude gathering system that a joint venture of WPX Energy and Howard Energy Partners (HEP) has been developing in the Delaware Basin’s Stateline area; that system currently includes more than 50 miles of pipe, with another 20-plus miles under construction. Last time, in Part 7, we examined the 860-mile Oryx Trans-Permian gathering and regional transport system, which Oryx Midstream Services has taken from initial concept to 23 producers and nearly 1 million dedicated acres in only five years’ time.
Today, it’s 3 Bear Energy’s turn. The company’s name (typically shortened to 3Bear) may remind some readers of the Goldilocks fairy tale (cut to the chase: she prefers porridge that’s neither too hot nor too cold), which is fitting, in a way, because 3Bear focused its development efforts on a Permian sweet spot where the conditions were “just right” for offering a full range of midstream services to area producers: not only crude gathering, but natural gas gathering, gas processing, and produced water gathering, recycling and disposal. Backed by GSO Capital Partners (a division of Blackstone) and Wells Fargo Energy Capital, 3Bear over the past couple of years has expanded its Hat Mesa Oil Gathering System into a roughly 200-mile network (bright green lines in Figure 1 and Figure 2) with about 170 miles of gathering pipes (74 miles of 4-inch-diameter, 62 miles of 6-inch and 35 miles of 8-inch) and 28 miles of small trunk lines (15 miles of 10-inch and 13 miles of 12-inch). The system opened up in the second quarter of 2018, initially smaller in scope and serving only one anchor shipper, but has since grown to serve nine more shippers with a total of 135,000 dedicated acres in the northern Delaware Basin. The network now has the capacity to transport up to 160 Mb/d of classic West Texas Intermediate (WTI) crude — most of it with an API gravity of between 39 and 41 degrees — to key takeaway pipelines (more on those in a moment), with 20 Mbbl of existing storage capacity in the Lynch area in central Lea County and 100 Mbbl more that will be in place there by August (2019).