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.
The pipelines carrying crude oil from the Permian Basin in West Texas to the Corpus Christi area have been as jammed as an urban highway on the Friday before Memorial Day weekend. The Gray Oak Pipeline, the largest from the Permian to Corpus, has just completed the 80-Mb/d first phase of a planned two-phase expansion that will add a total of 120 Mb/d of capacity. In today’s RBN blog, we’ll discuss what this project means for pipeline congestion and crude exports out of Corpus and nearby Ingleside.
As crude oil production in the Permian continues to grow and pipelines from West Texas to the Gulf Coast edge closer to full utilization, it’s becoming a challenge for producers and shippers alike. Amid this capacity crunch, one pipeline stands out as the only one with a detailed expansion plan: the 850-mile, 900-Mb/d Gray Oak Pipeline from West Texas to Corpus Christi and Sweeny, TX, which started up in late 2019 and became fully operational in early 2020. In today’s RBN blog — the latest in our series on Permian crude oil pipelines — we discuss Gray Oak Pipeline’s dynamic story, including its shifting ownership, strategic connectivity and expansion plans.
In the far western reaches of the Permian Basin lies Orla, TX — a town steeped in history and significance. Orla, which can be fittingly translated into “border” in Spanish, is about 40 miles north of Pecos, near the New Mexico border in Reeves County. Founded in 1890 as a section house for the Pecos Valley Railroad, Orla evolved from a modest stop along the tracks to a bustling oil supply hub — not your typical hub with lots of tank farms close together but still a heavy throughput area — by the 1960s. Though often considered a ghost town today, with a population thought to be in the single digits, Orla remains a vital player in the oil industry. As the origin region for several major takeaway pipelines in the Permian, this once-thriving community continues to serve as a crucial link in the region’s vast network of oil exploration, extraction and transportation, particularly along heavily traveled U.S. Highway 285. In today’s RBN blog, we look at the role that Orla plays in crude oil takeaway from the prolific Permian Basin.
In small steps and giant leaps, Enbridge has been building out two “supersystems” for transporting crude oil to refineries and the company’s own export terminals along Texas’s Gulf Coast, one moving heavy crude all the way from Alberta’s oil sands to the Houston area and the other shuttling light oil from the Permian to Enbridge’s massive terminal in Ingleside on the north side of Corpus Christi Bay. There’s nothing quite like it — first, an unbroken series of pipelines from Western Canada to Enbridge’s tank farm in Cushing, OK, (via the Midwest) and from there to Freeport, TX, on the twin Seaway pipelines; and second, the Gray Oak and Cactus II pipes from West Texas to the U.S.’s #1 crude export terminal. And the midstream giant is far from done. New projects and expansions are in the works, as we discuss in today’s RBN blog.
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.
With 2020 already in full swing, some things in the Permian Basin’s oil and natural gas markets have changed dramatically since this time last year, others not so much. When it comes to crude oil, new pipelines that came online during 2019 had a huge impact on differentials: Permian barrels are now pricing very close to other regional hubs, versus massive discounts a year ago. That has enabled Permian producers to fully benefit from the recent run-up in global oil prices. On the gas side of things, the start of the new decade won’t look much different than the end of the last one. There is still way too much supply and not enough takeaway capacity. That means that regardless of what happens at Henry Hub, the U.S. benchmark for natural gas prices, Permian producers should expect dismal values for their natural gas in 2020. Today, we take a look at the year ahead for Permian producers.
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.
