crude gathering systems

The collapse in crude oil prices and subsequent cuts in producers’ planned 2020 capital spending make it crystal clear that drilling activity in the Bakken will be slowing. Still, even with less drilling, it will take at least a few months for crude production in the North Dakota shale play to fall by much, and Bakken producers will continue to depend on crude gathering systems to give their wells the most efficient, cost-effective access to takeaway pipelines and crude-by-rail terminals. Longer term, it’s important to remember that sweet spots in the Bakken’s four-county core have some of the best rock outside the Permian. Today, we continue our series with a look at another leading midstreamer’s existing and planned gathering systems, as well as its joint-venture central delivery point, shuttle pipeline and crude-by-rail facility.

Of the many midstream companies with Permian crude oil gathering systems, a few also own bigger-diameter pipelines that shuttle crude to regional hubs as well as even larger takeaway pipelines to the Gulf Coast. Noble Midstream Partners is one of those that employs this “well-to-water” strategy, which enables midstreamers to participate in multiple links of the value chain; it can also give them better control over oil quality as crude makes its way from wells in West Texas and southeastern New Mexico to coastal refineries and export docks hundreds of miles away. Today, we conclude our series on Permian crude gathering with a look at the master limited partnership’s (MLP) mix of gathering, shuttle and long-haul pipelines.

Crude oil gathering systems in the Permian and elsewhere are, by their very nature, evolving things. They increase in mileage and crude-carrying capacity as new wells are drilled and completed, and it’s not uncommon for smaller systems to be consolidated into larger ones. It’s also become typical for the ownership of these systems to change — sometimes year to year — as early investors cash in on what they’ve developed, and buyers see opportunities to rake in increasing revenue and take their newly acquired systems to the next level. Also, owners of neighboring systems sometimes form joint ventures that combine their assets, all to make their operations work better for their producer customers. Today, we continue our series on Permian gathering with a look at Brazos Midstream’s crude gathering system in the Delaware Basin, which has experienced considerable evolution.

The run-up in Permian crude oil production over the past few years — and the expectation of continued gains — has been spurring the development of a number of crude gathering systems in the play’s Midland and Delaware basins. These small-diameter pipeline networks are critically important to producers and shippers in that they enable them to transport crude more quickly and cost-effectively than by truck, and (ideally) they connect to takeaway pipelines that flow to multiple destinations. But there is more than one approach to developing a gathering system. For example, a midstream company could plan a system that appeals to several producers in an area and then try to sign them up. Or, it might work closely with a single producer — sometimes an affiliated company — and design a gathering system to meet its specific needs, then work to add other producers and shippers later. Today, we look at the West Texas and southeastern New Mexico systems developed by a joint-venture company of Matador Resources and Five Point Energy to serve Matador and others.

Crude oil production in the Permian Basin is now approaching 4 MMb/d, and with more than 2 MMb/d of new pipeline takeaway capacity out of the resource-rich play set to come online over the next 12 months, there soon will be plenty of room for more production growth. To efficiently transport crude to takeaway pipes, however, producers and shippers need ever-growing networks of gathering systems in the Permian’s sweet spots where much of the drilling and completion activity is occurring. Ideally, these systems offer their users a high degree of optionality — that is, interconnections with multiple takeaway pipelines to different markets — so they can capture the best prices for their oil. Today, we continue our review of major gathering networks in the Permian with a look at Reliance Gathering’s nearly 250-mile system in the Midland, TX, area.

The rapid development of the Permian’s vast hydrocarbon resources that we expect will continue through the 2020s and beyond can’t happen if there’s insufficient gathering-pipeline infrastructure in place to transport crude from well sites to takeaway pipelines. Similarly, the favorable pricing that Permian producers hope to receive for their crude oil is possible only if their gathering systems are interconnected to two or more long-haul, big-bore pipelines that offer them some serious destination optionality. The need for new gathering pipes with multiple links to Gulf Coast- and Cushing-bound takeaway pipes is the driving force behind the Beta Crude Connector, a planned 100-mile-plus pipeline network in the heart of the Permian’s Midland Basin that was unveiled on Monday (April 15) by a joint venture of Concho Resources and gathering specialist Frontier Energy Services. Today, we kick off a new blog series on crude-gathering projects in the Permian with a look at the Concho/Frontier plan.