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Have It All - The Reliance Crude Gathering System in the Northern Midland Basin

Crude oil production in the Permian Basin is now approaching 4 MMb/d, and with more than 2 MMb/d of new pipeline takeaway capacity out of the resource-rich play set to come online over the next 12 months, there soon will be plenty of room for more production growth. To efficiently transport crude to takeaway pipes, however, producers and shippers need ever-growing networks of gathering systems in the Permian’s sweet spots where much of the drilling and completion activity is occurring. Ideally, these systems offer their users a high degree of optionality — that is, interconnections with multiple takeaway pipelines to different markets — so they can capture the best prices for their oil. Today, we continue our review of major gathering networks in the Permian with a look at Reliance Gathering’s nearly 250-mile system in the Midland, TX, area.

This is the second episode in our series. As we said in Part 1, large-diameter, long-haul pipelines from the Permian to the crude hub in Cushing, OK, or to Gulf Coast destinations like Houston and Corpus Christi garner most of the headlines, and for good reason. After all, it’s these pipes — biggies like Plains All American’s Basin and Cactus systems, Enterprise Products Partners’ Midland-to-ECHO, or Energy Transfer’s Permian Express III, plus a number of planned pipelines — that help move gargantuan volumes of oil from Permian hubs like Midland, Crane and Orla to domestic refineries or export docks. In contrast, gathering systems at first glance might seem like secondary players, with their smaller-bore pipes and lower capacities, but they actually play critical roles. Without them, crude oil would need to be transported by truck from the lease to injection points along larger pipelines — a less efficient and more costly alternative that would increase producers’ breakeven costs and reduce their profitability. We noted in our Hot Legs Drill Down Report that successfully developing crude 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.

Last time, 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 Permian’s Midland Basin in West Texas’s Andrews, Martin and Midland counties. The new (and expandable) system — with Concho as anchor shipper and others possibly joining it as a result of a planned open season this spring — will offer access to multiple delivery points, including local refineries and interconnections to a number of takeaway pipelines.

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