(July 14, 2014 – Platts) New Frontiers: Looking at the oil prospects in the Delaware Basin (By: Starr Spencer)
In another look at a highly prospective formation in the US, Starr Spencer reviews the outlook for the Delaware formation, part of the Permian basin, in this week’s Oilgram News column, New Frontiers.
If you’re an oil prospector these days and someone says “Delaware,” chances are what comes to mind won’t be the US’ tiny First State located south of Philadelphia but rather a West Texas/New Mexico basin that is turning up a rapidly rising amount of crude.
The hood-shaped Delaware Basin is really the western chunk of the larger Permian Basin. Like elsewhere in the Permian, the Delaware consists of multiple prospective “stacked” or pancaked geological layers which oil companies have only recently begun to exploit. In the Delaware, these reach 12,000 foot depths, a little deeper than eastern Permian areas.
Read the full story here: http://blogs.platts.com/2014/07/14/oil-delaware-basin/?sf3716251=1
Crude oil from the play currently goes to the US Gulf Coast, to the Cushing oil hub in Oklahoma on the Basin or Centurion pipelines; to East Houston on the Longhorn pipeline; or to Nederland, Texas, on the West Texas Gulf or Permian Express I pipelines. The new 300,000 b/d BridgeTex line will raise capacity to Houston when it begins service in mid-Q3.
Rail to the West Coast is now too expensive given current price differentials between the Delaware Basin and California versus the US Gulf Coast, analysts said. But pipeline doesn’t seem to be an option, either: Kinder Morgan’s proposed Freedom Pipeline was abandoned last year due to lack of shippers, “indicating the Gulf Coast is a more attractive market for Permian crude,” including Delaware Basin oil, Sandy Fielden, director of energy analytics for consultants RBN Energy, said.
Accordingly, developers are eyeing more infrastructure projects for the basin. One recent announcement was by producer Concho Resources, one of the most active Delaware operators, and Tulsa-based Frontier Midstream Solutions. The pair in May formed a joint venture to build and operate over 400 miles of crude oil gathering lines in the northern Delaware that can take over 100,000 b/d to multiple delivery points.
