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The New Adventures of Good Ole Boy Permian – The Race to the Gulf Coast

Apart from local refinery demand, the majority of Permian Basin crude production is currently shipped to Midwest refiners on existing pipelines. New takeaway capacity projects look to change that balance towards the Gulf Coast where prices are higher now. Today we review projects to add almost 1 million barrels per day of new Permian takeaway capacity by the end of 2014.

In Part I of our Permian Basin series (see a copy here) we looked at the renaissance of Permian production in the past three years using a combination of new horizontal drilling and conventional vertical drilling techniques as well as new technologies to recover oil from older wells. In Part II of the series (see a copy here) we looked at the existing Permian transport infrastructure to market. The three main pipelines out of the region are the Plains All America Basin Pipeline that delivers 450 MB/d from Midland to Cushing, OK, the 175 MB/d Occidental Centurion Pipeline running from South East New Mexico to Cushing and the 350 MB/d Sunoco Logistics West Texas Gulf Pipeline that runs East across Texas from Colorado City to Longview where it meets the Mid Valley Pipeline with access into the Midwest. Because the existing pipelines are at or close to capacity and they deliver into the less attractive Midwest market, producers such as EOG Resources have begun to move Permian Crude to St James, LA by rail to take advantage of higher prices.  As discussed here frequently, crude prices paid by Gulf Coast refiners are higher than the Midwest at the moment.

Four major new pipeline expansion projects are underway to move crude oil from the Permian Basin to the Gulf Coast within the next 2 years.  We will look at each in turn.

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