October 22, 2015 – Houston Chronicle
Oil ebbs, but they still seek the flow
By Robert Grattan
The oil price downturn has put an end to the pipeline construction boom spurred in recent years by shale production, and midstream companies are struggling to keep products flowing through their systems....
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The BridgeTex Pipeline began carrying 300,000 barrels per day from the region to the upper Texas Gulf Coast near Houston. An affiliate of Dallas' Energy Transfer added another 200,000-barrels-per-day capacity to its Permian Express Pipeline. And Plains All American's Cactus Pipeline offered a route to the Gulf Coast for another 250,000 barrels per day.
Simultaneously, the falling price of crude oil drove the number of active rigs in the Permian Basin from a high of about 560 to fewer than 230. Drillers still managed to increase production, but the growth rate flattened, and oil that could have ended up in pipelines stayed in the ground.
And since many producers that cut production were committed by contract to pay pipeline fares whether they produced oil or not, many began to buy oil already produced in Midland instead of pumping it themselves. As a result, the price of oil in Midland actually rose above the price at Cushing for a few months in 2015.
The Permian Basin is expected to continue to have excess pipeline capacity in the coming years, said Sandy Fielden, an analyst at consulting group RBN Energy. Enterprise Products Partners is planning to build a 540,000-barrel-per-day pipeline from Midland to Sealy, about 50 miles west of Houston. The company said in April it had secured long-term shipping contracts for the line.
