Permian crude oil production now tops 2.5 million barrels a day (MMb/d) and is expected to increase to 3.5 MMb/d by 2022 under RBN’s least optimistic price scenario. If prices hold steady or rise, production in the play could easily surpass 4 MMb/d within five years. But the Permian’s output isn’t just dependent on price. It’s also critically important that sufficient gathering capacity is in place to efficiently transport crude from the lease to central points where oil can flow onto shuttle pipelines or takeaway pipes. Today, we continue our blog series on key infrastructure in the nation’s hottest shale region with a look at a number of existing and planned gathering systems.
As we said in Part 1, with Permian production on the rise, there’s been a big push on to expand regional pipeline networks’ capacity to move more crude oil out of the play’s Delaware and Midland basins and — just as important — to give producers and shippers as many destination options as possible. Until a few years ago, most of the oil produced in the Permian flowed north to the crude storage and distribution hub in Cushing, OK. By 2011-12, though, rising crude production in the Bakken, western Canada and the Permian itself — combined with too little pipeline capacity from Cushing to the Gulf Coast — caused a supply glut at Cushing. That, in turn, caused heavy discounting for Cushing benchmark West Texas Intermediate (WTI) versus Louisiana Light Sweet (LLS) at the Gulf Coast, and spurred development of new takeaway capacity from the Permian to Houston and other coastal destinations.
But takeaway pipelines are only part of the story. Permian producers and shippers also need extensive gathering systems to move crude from the wellhead and, in many cases, intra-basin shuttle pipelines to transport oil from gathering systems in the Delaware Basin to takeaway pipes, most of which originate in the Midland Basin. We began our Permian infrastructure review with shuttle pipelines and hybrid gathering-and-shuttle systems, starting with Plains All American’s Advantage Pipeline — a true shuttle pipe — in Part 1. In Part 2, we looked at two major gathering-and-shuttle hybrids: Plains’ Alpha Crude Connector in the Delaware Basin and NuStar Energy’s Permian Crude System. Part 3 examined Medallion Gathering & Processing’s ever-expanding Wolfcamp Connector System, Medallion Delaware Basin’s Delaware Express Pipeline, Rangeland Energy’s RIO Pipeline and Magellan Midstream Partners’ Wink-to-Crane pipe. And in Part 4, we turned our attention to Oryx Midstream Services’ existing Trans Permian gathering-and-shuttling system and Pinnacle Midstream’s Sierra Grande Crude Pipeline, as well as Oryx’s planned 220-mile shuttle pipeline from the Delaware Basin to Crane and Midland, TX; and Phillips 66’s proposed Rodeo Pipeline. We also started our look at Permian crude gathering systems with a take on Targa Resources’ recently acquired Outrigger systems.
Today we discuss a number of existing and planned gathering systems in the Permian, beginning with Stakeholder Midstream’s new San Andres system.