Pioneer

Sometimes, courtship is better the second time around. After some previous rumors and flirting with a deal in the spring of 2023, ExxonMobil, the largest international integrated oil company, reached an agreement to acquire Pioneer Natural Resources, the largest pure-play Permian producer, for $64.5 billion, the largest-ever U.S. upstream transaction. In today’s blog, we analyze the deal that would make ExxonMobil the top Permian producer, including shifts in the focus and depth of its upstream portfolio, the integration with its existing midstream and downstream infrastructure, and its energy transition goals.

Constructing greenfield pipelines is never easy — just ask any midstream developer you know — but building them across the breadth of Texas comes with its own unique challenges. There’s distance, for starters, and today’s massive associated gas growth in the Permian Basin is occurring more than 400 miles from the closest demand along the Gulf Coast. That makes the pipelines relatively expensive at somewhere near $2 billion a copy. Integrating Permian supply with Gulf Coast demand also requires a big network of pipelines along the coast, as the demand is spread out from Louisiana to Mexico. Few midstream companies have such a network. Kinder Morgan does, one reason why, in our view, the Gulf Coast Express project was the first — and to-date the only — greenfield project from the Permian to proceed with a final investment decision. In the race to be the next Permian natural gas relief valve pipeline, the same hurdles will have to be overcome. On Friday, news came that a group of four companies is planning the Whistler Pipeline, and a closer look at the project reveals it may be capable of meeting the challenges needed to make it a serious player in the Permian pipeline race. Today, we look at the details of the latest Permian natural gas pipeline project.

We estimate October 2014 Eagle Ford condensate production at 690 Mb/d and have identified 450 Mb/d of stabilization capacity that meets Bureau of Industry and Security (BIS) standards to classify the processed output as OK for export. That should make it possible for an estimated 230 Mb/d of processed condensate to be exported from the Gulf Coast in 2015. All that is needed to open the floodgates are more transport routes to export docks. Today we describe current and future routes planned by Enterprise to get segregated processed condensate to market.

Last week Eagle Ford producer BHP Billiton – apparently tired of waiting for a ruling from the Department of Commerce Bureau of Industry and Security (BIS) – decided to export a cargo of processed condensate that they have “self-classified” as refined product – meaning it is not subject to U.S. export restrictions on lease condensate and crude oil. That move followed BIS approval for Enterprise and Pioneer to make similar exports in July 2014 and could set off a posse of similar condensate exports by Eagle Ford producers.  Today we review new market options for condensate producers.

After a WSJ story broke in late June that the Commerce Department’s Bureau of Industry and Security (BIS) had permitted the export of condensates by Enterprise and Pioneer, a good number of additional export requests were received by the agency.  Then a couple of weeks ago, Reuters reported that the BIS had put a “hold” on the approval of any more requests, implying that potential condensate exports were in limbo.  Turns out, as we understand it, there is no limbo – it is nothing more than an administrative process that takes time for any of these requests while the applicant is providing additional supporting information that the BIS requires.   There has also been misunderstanding in the industry about the process of receiving BIS approval for exports.  But in fact, approval is a fairly straight forward process of having BIS agree that your product should be classified as something designated EAR99 and assigned a CCATS number – for Common Classification Automatic Tracking System.  Today we explore this process and what it takes to get condensates approved for export.

In 2010 Enterprise Products Partners signed a ten-year agreement with Pioneer Natural Resources to transport, process and market their crude, gas and liquids production from the Eagle Ford. Today that agreement seems to have put Enterprise in the catbird seat after the Department of Commerce softened rules governing the export of lease condensate.  Today in the second of a two part series we describe stabilizer capacity and export routes to market for Pioneer, Anadarko and ConocoPhillips in the Eagle Ford.