Pipeline Transport

Necessity is the mother of invention, and the desperate need to transport increasing volumes of crude oil out of the severely pipeline-constrained Permian is spurring midstream companies and logistic folks in the play to be as creative as humanly possible. With the price spread between the Permian wells and the Gulf Coast exceeding $15/bbl in recent days — and possibly headed for $20/bbl or more soon — there's a huge financial incentive to quickly provide more takeaway capacity, either on existing pipelines or by truck or rail. Are more trucks and drivers available? Is there an idle refined-products pipe that could be put back into service? Could drag-reducing agents be added to an existing crude pipeline to boost its throughput? How quickly could that mothballed crude-by-rail terminal be restarted? Today, we discuss frenzied efforts in the Permian to add incremental crude takeaway capacity of any sort — and pronto.

Houston area refineries are currently operating with about a third less onshore storage (measured in storage days) than comparable refineries in other regions. Waterborne crude imports help to alleviate the challenges that this constraint can cause. But Houston is importing less waterborne crude nowadays – down by 0.5 MMb/d since 2011 to just under 1 MMb/d and that number will continue to fall as US production increases. When you add the challenges of handling crude quality issues, including apotential new requirement to segregate certain types of condensate, the storage shortfall looks even worse. Today we continue our analysis of Houston area crude storage.