Most crude oil gathering systems in the Permian — and elsewhere — have a relatively simple aim: to reliably and efficiently deliver crude from the lease to larger pipelines downstream that provide their shippers a high degree of destination optionality — end of story. A select few systems, though, have evolved into key elements of their owners’ larger value chain. With these, crude flows through gathering systems and takeaway pipes to export terminals — maybe even refineries — all held by the same company or its affiliates. By integrating assets from the site of crude production to the refinery or export dock, such owners add value each step of the way. Today, we continue our series with a look at Marathon Petroleum/Andeavor Logistics’ Permian crude gathering system, which started out relatively small and isolated but has evolved into something much bigger and better connected.
In addition to describing specific gathering systems in the Permian, this series has shown how different these systems can be from one another. Part 1 examined 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. In Part 2, we 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. Part 3 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. 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. Part 7 reviewed 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. And, in Part 8, we discussed 3 Bear Energy’s Hat Mesa Oil Gathering System, which over the past couple of years has grown to become a network of 200 miles of gathering lines and small trunk lines serving nine shippers in the northern Delaware Basin.
Today, we discuss the Permian gathering system owned by Andeavor Logistics, a master limited partnership (MLP) of Marathon Petroleum Corp. (MPC, with a ~64% share) and other investors (~36%). We should note up-front that MPLX — another MLP in which MPC holds a ~64% stake — announced on May 8, 2019, that it has reached an agreement to acquire Andeavor Logistics and combine its midstream assets with MPLX’s. That deal, which is expected to close in the second half of this year, is only the latest in a series of strategic moves involving MPC, MPLX and Andeavor Logistics this decade. As for MPC, it formed MPLX in 2012 to own and develop midstream assets; in 2015, MPLX grew much larger by acquiring MarkWest Energy Partners, a leading natural gas processor and fractionator (among other things). And, last October, MPC closed on the $23 billion acquisition of Andeavor, a large refining and logistics company (and the former parent of Andeavor Logistics). Andeavor had a complicated history of its own. Then known as Tesoro Corp., the company in 2011 formed Tesoro Logistics (an MLP); in 2017, Tesoro Corp. acquired Western Refining — renaming itself Andeavor when it did and combining Tesoro Logistics and Western Refining Logistics to form Andeavor Logistics. Yes, it’s been a busy few years!