Houston and Corpus Christi have been locked in a battle for the top spot as the primary outlet for Permian crude. Lately, the pendulum has been swinging toward Corpus — and not by accident.
Houston and Corpus Christi have been locked in a battle for the top spot as the primary outlet for Permian crude. Lately, the pendulum has been swinging toward Corpus — and not by accident.
Hundreds of miles separate the Permian Basin from the U.S. Gulf Coast, but in the Shale Era traversing that span has become increasingly important to Permian producers. Billions of dollars have been invested to expand capacity to move Permian production — crude, natural gas or NGLs — to the Gulf Coast to take advantage of surging export markets. In today’s RBN blog, we’ll focus our attention on EPIC Midstream and its EPIC Crude Pipeline, which has operated above its nameplate capacity for much of this year.
For years, the South Texas NGL market was a world of its own — a self-contained liquids ecosystem centered around the refineries and petrochemical plants in the Corpus Christi area. But that all changed about six years ago when EPIC Midstream built a new NGL pipeline from the Permian into Corpus and a new fractionator to process those liquids. Corpus morphed into a vibrant NGL market in its own right. But nothing with South Texas NGLs is easy. Before the EPIC system was even up and running, a consortium calling itself BANGL — short for Belvieu Alternative NGL — announced another pipeline to compete for Permian NGLs that would parallel EPIC’s route out of the Permian, but then make a hard left toward Sweeny and Texas City, setting up a battle of the pipes for Permian NGLs.
Through the second half of the 2010s, the Permian Basin’s crude oil supply trajectory was clear: up, up and up. From the start of 2015 to the end of last year, crude production in the world’s leading shale play increased by an amazing 3 MMb/d, from 1.7 MMb/d to 4.7 MMb/d. Three new pipelines with a combined capacity of more than 2 MMb/d were built to move a lot of those incremental barrels to Corpus Christi, which — thanks in part to newly developed storage and docks — has become the U.S.’s #1 port for crude exports in recent months. But Permian producers have trimmed their crude output by at least several hundred thousand barrels a day this spring in response to falling demand and low prices. Has the Permian been thrown off course, and if it has, what would that mean for marine terminals in Corpus? Today, we continue our series of Gulf Coast crude export facilities with a look at the three newest terminals along the Corpus Christi Ship Channel.
Underlying Monday’s financially driven oil price rout are physical markets that are in extreme turmoil as they contend with severely reduced demand resulting from the COVID lockdowns and rapidly filling storage tanks. In the Permian Basin, the epicenter of U.S. shale oil, the crude benchmark price — WTI at Midland — on Monday crashed to a historical low of negative $13.13/bbl before rebounding to a positive $13.01/bbl Tuesday. The same day, prices at the Permian natural gas benchmark Waha revisited negative territory for the third time this month, with a settle of minus $4.74/MMBtu for Tuesday’s gas day. Negative supply prices aren’t new to Permian producers, at least for gas — Waha settled as low as minus-$5.75/MMBtu in early April 2019. But up until a couple months ago, oil prices were supportive enough to keep producers drilling regardless. Now, that’s all over, at least for a while. What can we expect now that negative oil prices have arrived in the Permian? Today, we’ll dissect the latest bizarre pricing event to rattle the Permian natural gas and oil markets.
To say that Permian crude oil quality varies is an understatement at best. In fact, there’s as much variety in the crude coming out of West Texas as there is in the arsenal of a major league pitching ace. Handling those varied crude qualities is the challenge of midstream operators, who, like batters facing down a Randy Johnson or Pedro Martinez in their prime, need to do the best they can with what they’re given. With the start of spring training only a month away, we begin a series detailing the current mix of Permian crude oil qualities, how pipelines are handling them, and what it means for exports, the end destination for much of today’s incremental Permian oil production. Today, we discuss Permian crude quality variations and the steps new pipelines are taking to deal with it.
Despite last month’s much-publicized start-up of two new crude oil pipelines from the Permian Basin to the Gulf Coast — Plains All American’s Cactus II and EPIC Crude Holding’s EPIC Pipeline — tangible evidence of how much crude is actually moving on those pipelines has been hard to come by. That’s because crude oil pipelines don’t post daily flow data, like some natural gas pipelines do, and shipper volumes are a closely held secret that often only becomes available long after the fact. However, Cactus II and EPIC both deliver into the Corpus Christi, TX, market area, where a number of export facilities have been waiting to move Permian barrels out into the global market. We’ve been keeping a close eye on Corpus-area docks and have noticed a significant increase in export volumes over the last few days — a clear indication that Permian crude on Cactus II and EPIC has broken through to the global market. Today, we detail a recent rise in Corpus Christi oil export volumes driven by new supply from the Permian Basin.
Battered by a flood of new supply and limited pipeline takeaway capacity, prices for Permian natural gas and crude oil have spent a lot of time in the valley over the past 18 months. West Texas Intermediate (WTI) crude oil prices at the Permian’s Midland Hub traded as much as $20/bbl less than similar quality crude in Houston last year. That’s a big oil-price haircut that producers have had to absorb while ramping up production. However, the collapse in the Permian crude oil differential was tame compared to what happened with Permian natural gas prices. Prices at the Waha Hub in West Texas traded as low as negative $5/MMBtu, a gaping $8/MMBtu discount to benchmark Henry Hub in Louisiana. As bad as that all was, new pipeline takeaway capacity has arrived, and Permian prices are beginning to claw their way out of the depths. Today, we look at how new pipelines are impacting the prices received for Permian natural gas and oil.
Permian midstream development activity has been happening at a rapid pace over the past few years, and we’ve featured many of those projects in the RBN blogosphere. One of the most aggressive players has been Salt Creek Midstream, which is in the midst of a big Permian buildout focusing on natural gas, crude oil, natural gas liquids and even produced water. Salt Creek isn’t only developing local midstream infrastructure; it’s also at work on long-haul solutions that will enable Permian producers to access markets along the Texas Gulf Coast — a wellhead-to-water strategy, you might call it. Helping Permian producers meet their needs to take away all three hydrocarbons plus produced water with integrated transport and pricing options is the key to Salt Creek’s effort. Today, we dive into the details of the company’s expansive Permian infrastructure development plan.
