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Come Gather ‘Round Pipelines – Part 3: Plains Permian Crude Gathering System Expansions

Permian Basin crude production is expanding rapidly. At over 1.5 MMb/d it already represents nearly 19 percent of total US crude output. Midstream companies are busy developing more than a dozen gathering system extensions and additions to deliver Permian production to about 1 MMBbl of mainline pipeline capacity coming online between the start of 2013 and 2015. In today’s blog we detail planned improvements to the Basin and Cactus pipelines.

In Episode 1 of this series we reviewed the current crude price situation and takeaway capacity balance in the booming Permian Basin. At the moment, production exceeds local demand and takeaway capacity so that producers are experiencing price discounts at Midland, TX for West Texas Intermediate (WTI) and West Texas Sour (WTS) crudes versus the Cushing, OK trading hub of around $8/Bbl. The spread between Midland WTI and the Gulf Coast benchmark light sweet crude Light Louisiana Sweet (LLS) is about $10/Bbl. As soon as the new 300 Mb/d BridgeTex pipeline – a joint venture between Magellan Midstream and Occidental – comes online in June we can expect the Midland/LLS spread to narrow. In the meantime, the price spreads are generally too low to justify more expensive rail transport out of the Permian. In Episode 2 we provided an overview of the mainline pipelines out of the Permian and the current centers of production activity and then started our survey of gathering systems with the new Cline Shale pipeline lateral expected online in June of this year that will deliver up to 75 Mb/d of crude to the Centurion and BridgeTex pipelines in Colorado City. In this episode we cover pipeline additions and expansions planned by Plains All American.

Plains All American

We have frequently detailed the midstream operations of Plains All American Pipeline L.P. (PAA) - one of the largest midstream crude oil players in the US. The company handles about 3.5 MMb/d of crude oil and natural gas liquids (NGLs) as well as storage and terminal facilities for natural gas, natural gas liquids, crude and refined products. Plains operate significant crude gathering systems in the Permian and Eagle Ford basins. We originally described the Plains Basin pipeline in the New Adventures of Good ‘Ole Boy Permian and we have also covered their midstream activities in Part 3 and Part 4 of our Eagle Ford series “Knocking on Heaven’s Door”. We covered Plains infrastructure to move condensate from the Eagle Ford to Western Canada in Plains Trains & Diluent Deals and we also detailed their crude by rail activities in the Bakken in our Crude Loves Rock’n’Rail series in 2013.

Plains in the Permian

Plains owns and operates significant crude oil assets in the Permian Basin including (as of February 2014) 3,550 miles of pipelines, 8 MMBbl of storage capacity and ~100 gathering truck stations (see map in Figure 1). The company transports about 1.4 MMb/d of oil in the Permian including 375 Mb/d of “first purchaser” gathered barrels. The principal pipeline asset is the Basin Pipeline (red line in Figure 1) that runs from Jal, NM to Midland, TX and then to Cushing, OK via Wichita Falls. The Basin pipeline has a double loop, known as the Mesa pipeline between Midland and Colorado City. The current crude capacity from Colorado City to Cushing is 450 Mb/d.

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