gas gathering systems

Rome wasn’t built in a day and neither were the large, wellhead-to-market natural gas and NGL networks that Phillips 66 and a handful of other midstream empires have assembled — many of them targeting the all-important Permian. Now, P66 has reached an agreement to acquire Pinnacle Midstream, whose associated gas gathering system and gas processing complex in the heart of the Midland Basin nicely complement a host of other gathering and processing assets P66 controls through its majority stake in DCP Midstream. In today’s RBN blog, we’ll discuss P66’s planned purchase of Pinnacle Midstream and what it means for the Permian piece of the acquiring company’s broader natgas/NGL system. 

Amid all the energy-market excitement of the past few months — the soaring demand for LNG, the march to $100/bbl crude oil, sky-high propane prices, and the like — there also has been a continuing consolidation and repositioning in the U.S. midstream sector. While midstream M&A activity has been all over the map, literally and figuratively, it also has revealed discernible themes, chief among them a push to increase the scale and efficiency of gathering systems. Also evident is the desire to expand into growing production areas and, for some energy giants, to either buy out stakes held by joint venture partners or absorb midstream master limited partnerships they had spun off a few years ago. In today’s RBN blog, we discuss a variety of recent midstream deals and what they tell us about 2022’s energy market.

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 biggest news on the Permian natural gas infrastructure front in the past couple of months was surely the start-up of the 2-Bcf/d Permian Highway Pipeline (PHP), which began flowing gas in the fourth quarter of 2020 and officially entered full commercial service on New Year’s Day. Next among the headlines would be the late-January completion of a 1.8-Bcf/d expansion of the Agua Blanca pipeline system, which increased the capacity of the Delaware Basin-to-Waha network to a staggering 3 Bcf/d. Just as important though is that midstream companies active in the Permian have been completing a number of new gas processing plants in key production areas within both the Midland and Delaware basins, thereby supporting the continuing development of the U.S.’s premier crude oil production region. Today, we begin a short series on all the new gas-handling capacity coming online in the Permian.