Hot Legs - Crude Oil Shuttle Pipelines in the Permian's Delaware and Midland Basins, Part 4

Permian producers and shippers want to be able to transport their crude oil to whichever destination will give them the best netbacks. But that’s a moving target, so what they really need is destination optionality — something they can only get if the gathering systems and shuttle pipelines that move oil from the lease tie into multiple takeaway pipelines with different end-points like Houston, Corpus Christi and Cushing. Midstream companies are clamoring to meet that need by expanding existing shuttle pipelines and building new ones. Today, we continue our review of intra-Permian shuttle pipelines.

With Permian crude oil production expected to continue rising under just about any foreseeable price scenario, there’s a big push on to expand regional pipeline networks’ capacity to move more crude oil out of the play and — just as important — to give producers and shippers as many destination options as possible. As we said in Part 1, 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.

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In Part 1, we also discussed Plains All American’s Advantage Pipeline, a true shuttle pipe, and 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 pipeline. Today, we turn our attention to Oryx Midstream Services’ existing Trans Permian gathering-and-shuttling system; Oryx’s planned 220-mile shuttle pipeline from the Delaware Basin to Crane and Midland, TX; Phillips 66’s proposed Rodeo Pipeline; Crestwood Equity Partners’ planned Delta Crude Pipeline; and Pinnacle Midstream’s Sierra Grande Crude Pipeline. We’ll then begin our review of Permian crude gathering systems with a look at Targa Resources’ recently acquired Outrigger systems.

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