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40 Miles from Denver, Part 2 - Noble Midstream's Crude Gathering Systems in the D-J Basin

The doubling of crude oil production in the Denver-Julesburg Basin over the past 18 months spurred a rapid build-out of crude gathering systems and other infrastructure. Unlike the sprawling Permian Basin, with its numerous centers of drilling and production activity in parts of West Texas and southeastern New Mexico, the vast majority of the D-J Basin’s incremental crude output has come from Weld County, CO. Understandably, Weld County also is where most of the D-J’s crude gathering systems are located, and where most of the gathering system expansions are being planned and built. Today, we continue a series on existing and planned pipeline networks to move D-J crude from the lease to regional hubs and takeaway pipes.

In Part 1, we explained that the D-J Basin in northeastern Colorado and southeastern Wyoming offers an unusually intense concentration of hydrocarbons within four geologic layers, or “benches,” only a few thousand feet below the surface, as well as low per-well drilling costs and direct pipeline access to the crude hub in Cushing, OK. We also pointed out that the rate of crude oil production growth in the D-J Basin in 2018-19 has been second only to the Permian, and that D-J production now averages about 640 Mb/d. To kick off our review of crude gathering systems in the D-J, we started with the play’s largest network: the Black Diamond system in Weld County, which is jointly owned by Noble Midstream Partners and Greenfield Midstream.

Noble Midstream is a master limited partnership (MLP) formed in 2016 by Noble Energy, one of the largest producers in the D-J; Greenfield Midstream, in turn, is a privately held midstream developer and owner. Black Diamond currently has about 240 miles of gathering pipe and 390 Mbbl of crude storage capacity; another 30 Mbbl of storage will come online in the first quarter of 2020. Nearly a dozen customers have dedicated a total of about 286,000 acres to the system, whose crude oil flows now average about 130 Mb/d. Finally, we noted that Black Diamond recently secured an option to purchase up to a 20% ownership interest in the Saddlehorn Pipeline, one of the big crude conduits linking the D-J and Cushing; that option expires in April 2020.

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