The prolific, liquids-rich Permian Basin and Eagle Ford plays have attracted more than a dozen midstream companies interested in meeting the growing need for natural gas processing plants, fractionators and natural gas liquids pipelines. Some of the larger players have assembled broad-based portfolios of assets, while others have focused on more stand-alone NGL pipeline or gas processing investments. Today we begin wrapping up our series on NGL-related assets in two of the nation’s most important shale plays.
Although as everyone ought to know by now, overall crude prices have dropped more than 35% in the past six months, prospects for the prolific Permian Basin continue to look rosy. Wide price discounts experienced by Permian producers at Midland, TX versus West Texas Intermediate (WTI) crude delivered to Cushing, OK over the past 13 months have narrowed recently in anticipation of the Plains All American Sunrise pipeline coming online. Permian production has been surging all year and midstream companies continue to invest in and expand takeaway capacity. Today we review ongoing infrastructure plans to handle growing output.
With Western Canadian oil sands bitumen output increasing rapidly, producers need more diluent to blend with their production so that it can flow to market in pipelines. That means delivering diluent to remote locations as far as 250 miles northwest of Edmonton. Smaller oil sands projects typically get their diluent delivered by rail or truck but pipeline infrastructure is being built out for larger projects as their production comes online. Inter Pipeline (IPL) diluent delivery volumes on their Polaris pipeline at the end of 2013 were just 20 Mb/d. By 2017 that volume could be to 1.2 MMb/d. Today we detail IPL and Plains build out plans.
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.
By Q2 of 2015, the Plains and Enterprise joint venture pipeline in the Eagle Ford will carry up to 470 Mb/d of crude and condensate to market in Houston and Corpus Christi including barrels shipped from the Permian Basin on the Cactus pipeline. This pipeline expansion will easily make the two-midstream operators the largest players in the Eagle Ford market. On top of that, Enterprise already has a leg up in the race to crank up condensate exports – having recently won one of the coveted BIS letters. Today we describe recent expansions in these two company’s Eagle Ford networks.
New crude pipeline capacity being added in the Rockies to ease congestion will compete directly with rail terminals built or planned in the region. Some of these rail terminals are purpose built to take barrels off the pipelines for delivery to West Coast refiners or perhaps to facilitate blending of heavier Canadian grades with lighter shale crudes. The competition between pipelines and rail in the region underlines a key accomplishment of the post-shale crude distribution system - the advent of greater choice for producers. Today we describe growing rail alternatives in the Rockies.
Permian Basin crude production is expanding rapidly. At over 1.5 MMb/d it already represents nearly 19 percent of total US crude output. Midstream companies are busy developing more than a dozen gathering system extensions and additions to deliver Permian production to about 1 MMBbl of mainline pipeline capacity coming online between the start of 2013 and 2015. In today’s blog we detail planned improvements to the Basin and Cactus pipelines.
Recently there has been a spate of pipeline tariff filings to the Federal Energy Regulatory Commission concerning crude oil quality specifications for Bakken crude in North Dakota. While the immediate disagreement between pipeline company Enbridge and shipper Plains Marketing appears to have been resolved, it has highlighted an issue which has not received much attention until now. Today we detail the concerns.
North Dakota Bakken crude production continues to grow at record rates with nearly 770 Mb/d produced in December 2012 up 40 percent since January 2012. The North Dakota Pipeline Authority estimates that 64 percent of that crude was transported to market by rail in December. After local refinery consumption (80 Mb/d) that means 440 Mb/d moving by rail. Today we continue our survey of North Dakota crude rail loading terminals with an in-depth look at three midstream companies that between them can potentialy load 280 Mb/d of crude in North Dakota.
Total crude oil shipped out from the South Texas Port of Corpus Christi increased 19 fold between November 2011 and November 2012 from 2.1 MMBbl to 36 MMBbl. All of that crude is coming from the Eagle Ford shale oil basin 70 miles north of Corpus in the form of light crude or condensate via pipeline. Six marine terminals have been built or expanded at Corpus but can they handle the traffic jam? Today we review how the Port is coping.
When Plains All American began building out their terminal at St. James in 2004 the business model was based on crude imports flowing through LOOP. That had to change gears along with the market. Since then they have developed a successful business transporting condensate to Western Canada – that is now being supplied from the Eagle Ford basin. Plains also built a crude rail unloading facility at St. James before crude by rail hit the headlines. Today we describe how Plains successfully leveraged their St. James terminal assets.
Eagle Ford crude production is close to 600 Mb/d as of July 2012. Most forecasts show that number increasing to about 1,200 Mb/d over the next five years. Takeaway projects being developed today to go online by 2013 have capacity for 1,650 Mb/d. The midstream companies building these projects are either wildly optimistic or they know something about Eagle Ford production that we don’t. Today we look at plans for condensate takeaway from the Eagle Ford.
After NYMEX WTI climbed higher all last week, topping $90/Bbl, euro-zone worries yesterday caused a 4 percent fall in crude to close at $88.14/Bbl. That is a still a long way above estimates of $50/Bbl break-even prices for crude produced from Eagle Ford shale. Oil production in the Eagle Ford is now close to 600 MB/d and estimated by Bentek to rise to over 700 MB/d by the end of this year. This South Texas play is attracting producers like bees to a honey pot. Midstream infrastructure projects are springing up left right and center. In the first of a series we look at how Eagle Ford crude prices compare to the Bakken.
Yesterday I attended and was a speaker at the 5th Annual Platts Midstream Development Conference at the JW Marriott in Houston. The conference continues through noon on Wednesday. There were a number of excellent presentations throughout the day that we will summarize here during this week. We’ll start with a particularly interesting review of the Plains All American strategy for the Bakken, presented by Jim Cantwell, President, Plains Gas Solutions.