shuttle pipelines

The Bakken Shale is being hit especially hard by production cuts this spring. Crude oil-focused producers large and small have been shutting in wells and putting well completions on hold, slashing daily crude output by more than one-sixth. The rig count is down by half in less than two months — to 26, the play’s lowest level since mid-2016 — and thousands of oilfield workers have been let go. All this is happening despite the facts that the Bakken’s four-county core has some of the best shale assets outside the Permian and that in 2017-19 the play was super-hot, with crude production increasing by 50%. That three-year growth spurt spurred the development of a number of new crude gathering systems, many of which now face a period of significant underutilization. Today, we discuss highlights from our new Drill Down report on oil production and supporting infrastructure in the U.S.’s #2 shale play.

There already are indications that newly available takeaway-pipeline capacity out of the Permian Basin is goosing crude oil production growth there. Flows on those new pipes — Plains All American’s Cactus II and the EPIC system — are ramping up, crude exports are setting new records, and the end of big price discounts for oil at Midland versus Cushing and the Gulf Coast are giving Permian producers an economic incentive to produce more. And more takeaway capacity is on the way, including the 900-Mb/d Gray Oak Pipeline, which is slated to come online in the fourth quarter. Fast-rising production is putting new pressure on producers and their midstream partners to build and expand crude gathering systems and shuttle pipelines — especially in the Permian’s Delaware Basin, which has a lot less gathering pipe in the ground than the Midland Basin and which is poised for phenomenal production growth the next few months and years. Today, we discuss highlights from our second Drill Down Report on Permian gathering systems, this one focusing on developments in the fast-growing Delaware Basin in West Texas and southeastern New Mexico.

Permian crude oil production now tops 2.5 million barrels a day (MMb/d) and is expected to increase to 3.5 MMb/d by 2022 under RBN’s least optimistic price scenario. If prices hold steady or rise, production in the play could easily surpass 4 MMb/d within five years. But the Permian’s output isn’t just dependent on price. It’s also critically important that sufficient gathering capacity is in place to efficiently transport crude from the lease to central points where oil can flow onto shuttle pipelines or takeaway pipes. Today, we continue our blog series on key infrastructure in the nation’s hottest shale region with a look at a number of existing and planned gathering systems.

Permian producers and shippers want to be able to transport their crude oil to whichever destination will give them the best netbacks. But that’s a moving target, so what they really need is destination optionality — something they can only get if the gathering systems and shuttle pipelines that move oil from the lease tie into multiple takeaway pipelines with different end-points like Houston, Corpus Christi and Cushing. Midstream companies are clamoring to meet that need by expanding existing shuttle pipelines and building new ones. Today, we continue our review of intra-Permian shuttle pipelines.

Shuttle pipelines in the Permian provide high-volume, straight-shot links between crude oil gathering systems and multiple takeaway pipelines out of the play ­­— giving producers and shippers critically important destination optionality. Assuming the shuttles are well-positioned and tied to increasing production on one end and multiple takeaway pipes on the other, existing intra-basin shuttles are highly valued and being gobbled up by major midstream players. And to keep pace with Permian production growth, existing shuttle systems are being expanded and new ones are being planned. Today, we continue our review of key crude-related infrastructure in the nation’s hottest oil production region.

There’s a fierce battle on to build new intra-basin pipelines in the Permian to transport crude oil from gathering systems in hot new production areas to takeaway pipelines out of the play — and to give producers and shippers destination optionality in the process. Participants better bring their A game, though, because successfully developing “shuttle” pipelines in the Permian requires a keen understanding of what’s happening on the field and how best to move the ball forward. Three key factors are lining up producer commitments, providing that critical takeaway optionality, and minimizing the total cost of moving crude from the lease to the Gulf Coast, Cushing or other destinations. Today, we begin a blog series on existing and planned intra-basin oil pipelines in the Permian — what drives the development of these in-demand pipeline “legs” and what it takes for them to succeed.