The U.S. midstream sector is clamoring to build takeaway pipelines for ballooning natural gas production volumes in the Permian Basin and get ahead of any developing takeaway capacity constraints. In the past year, a number of companies have floated plans for moving Permian gas supply east to the Gulf Coast, spurred on by two primary factors — expectations for accelerated supply growth in West Texas; and on the other end, emerging demand from a combination of LNG export facilities being developed on the Texas and Louisiana coasts, and the slew of export pipeline projects targeting growing industrial and gas-fired power generation demand in Mexico. These expansion projects are in a bit of a horse race, not just to beat the clock on potential transportation constraints, but also competing against an increasingly larger field to secure shipper commitments and make it to completion. Among the factors affecting their progress will be their in-service dates and their destination markets. Today, we provide an update on these competing pipeline projects, including the newest entrant, Tellurian’s Permian Global Access Pipeline.
This is Part 3 of our series on emerging takeaway constraints in the Permian and the pipeline projects planned to alleviate them. As we noted in Part 1 of this series, Permian producers have been on overdrive lately, and production of crude oil and NGL-packed associated gas from the Permian is rapidly rising. Breakeven costs in the Permian are some of the lowest in the country, and producers’ capex plans for 2018 certainly reflect that, indicating production growth in the region will only accelerate from here. That’s put the spotlight on Permian infrastructure, a topic we’ve covered extensively, both in the RBN blogosphere and in our Permian-focused Drill Down Reports on crude takeaway pipelines, gas pipelines, NGL pipelines and crude shuttle pipelines and gathering systems. There is an increasing need for more takeaway capacity, and there’s been no shortage of proposals in the past year to help address that, with more likely on the way.
On the oil side of things, more than 3 MMb/d of new takeaway capacity was announced in 2017. When it comes to preventing constraints, however, it’s not just the capacity but also the timing (relative to production) that will come into play. As we showed in Part 2 of this series, crude production in the Permian had been inching closer to effective pipeline capacity, and if not for Enterprise Products Partners’ 450-Mb/d Midland-to-Sealy Pipeline and Energy Transfer Partners’ 100-Mb/d Permian Express III Phase I coming fully online this quarter, producers would most certainly feel a pinch in pipeline space through much of 2018. But even with those two projects up and running, producers would again be in a bind by early 2019, if not for an expected bump in takeaway capacity from the EPIC Pipeline, which just completed a successful open season last month and is now slated to add 550 Mb/d of crude takeaway capacity in first-quarter 2019.