Permian producers and midstreamers have faced a lot of uncertainty over the past 12 months. First, they wondered how much demand destruction would be caused by pandemic-related lockdowns, how low crude oil prices might fall, and how much production would be cut back and where. Then, they needed to assess how quickly demand, prices, and production levels would rebound, and determine whether the gathering systems, gas processing plants, and other infrastructure they had been planning pre-COVID should proceed according to their original schedules or be delayed or even canceled. As it turned out, most of the projects went ahead, the developers anticipating — correctly, it now appears — that if any U.S. production area will keep growing, it will be the Permian. Today, we continue a short blog series on gas-related infrastructure development in 2020-21, this time focusing on the Delaware Basin.
The companies that drill for crude oil and natural gas in the Permian and build the pipes and processing plants that help bring those commodities to market, lived a Tom Brady kind of life in the second half of the 2010s. Sure, they may have suffered a minor setback or two, but generally speaking, everything for Permian producers and midstreamers was up and to the right. Then came 2020, an unforgettable year — and in a bad way.
As we said in Part 1 of this blog series, the vast majority of the gas pipeline and processing plant projects already under construction in the Permian when the oil market turned south 12 months ago, stayed on track. On the pipelines front, Matador Resources last year expanded its gathering system in southeastern New Mexico’s Eddy County — part of the Delaware Basin — to deliver more associated gas from the Greater Stebbins and Stateline areas to its newly expanded Black River gas processing complex, also in Eddy County. (More on Black River’s processing capacity in a moment). Late last year, the 2-Bcf/d Permian Highway Pipeline (PHP) to the Gulf Coast started flowing some gas in the fourth quarter of 2020 and officially entered full commercial service on January 1, 2021. Then, late last month, a 1.8-Bcf/d expansion of the Agua Blanca pipeline system came online, increasing the capacity of the Delaware Basin-to-Waha network to a whopping 3 Bcf/d.
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