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Hot Legs - Crude Oil Shuttle Pipelines in the Permian's Delaware and Midland Basins, Part 3

Expectations of continued production growth in the Permian’s Delaware Basin — and the need to provide crude oil producers and shippers with multiple connections to takeaway pipelines out of the play — are spurring the expansion of existing shuttle pipelines and the development of new ones. A number of these shuttle pipes are part of larger gathering-and-shuttle systems whose pipe diameters increase as they move crude downstream toward takeaway interconnections. Today, we continue our review of intra-basin pipelines that transport oil to takeaway pipes and provide destination optionality in the process.

The build-out of Permian crude oil takeaway pipelines took place over several decades, generally in response to the dual requirements to move increasing volumes out of the play and to help producers gain the highest possible price per barrel. As we said in Part 1, during the Pre-Shale Era, 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, as well as the development of new takeaway capacity from the Permian to Houston and other coastal destinations.

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 — the latter of which until recently was known as the Big Spring Gateway. Today, we will examine Medallion Gathering & Processing’s existing (but ever-expanding) Wolfcamp Connector System, affiliate Medallion Delaware Basin’s almost-finished Delaware Express Pipeline, Rangeland Energy’s year-old RIO Pipeline and Magellan Midstream Partners’ planned Wink-to-Crane pipeline.

Wolfcamp Connector System

Medallion Gathering & Processing’s Wolfcamp Connector System (WCS; aqua lines in Figure 1), whose first elements came online in 2014, has quickly grown into a large gathering-and-shuttle pipeline system that collects crude produced in six prolific counties in the Permian’s Midland Basin (Martin, Howard, Midland, Glasscock, Upton and Reagan) and then transports it in larger-diameter trunklines or shuttles to the crude hubs in Midland, Colorado City or Crane. From the crude hubs, the gathered-and-shuttled oil can be fed into a number of takeaway pipelines, including Plains’ Basin Pipeline (light green line), Occidental Petroleum’s Centurion Pipeline (dark blue line), Energy Transfer Partners’ West Texas Gulf (dark green line) and Permian Express II (brown line), Plains’ and Magellan Midstream Partners’ BridgeTex Pipeline (dark purple line), Magellan’s Longhorn Pipeline (yellow line), and Enterprise Products Partners’ almost-finished Midland-to-Sealy Pipeline (orange-and-black dashed line). Crude gathered by the WCS also can flow directly to Delek US’s 73-Mb/d Big Spring (TX) refinery in Howard County (green diamond).

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