When Are You Gonna Come Down? Getting Processed Condensate to the Gulf Coast

The Plains All American (PAA) Cactus Pipeline comes online in the West Texas Permian this month (April 2015). Cactus will bring up to 250 Mb/d of crude and condensate from Midland and McCamey in the Permian to Gardendale, TX - the heart of the Eagle Ford shale – linking the two basins for the first time by pipeline.  It also forms a major component of an expanded pipeline and dock infrastructure owned by a combination of PAA and Enterprise Product Partners (EPD) set to deliver as much as 600 Mb/d of crude and condensate to Corpus Christi and 470 Mb/d to Houston by the end of 2015. Today we describe how a good deal of those deliveries will be processed condensate eligible for export.

PAA is one of the US midstream behemoths - handling about 4 MMb/d of crude oil and natural gas liquids (NGLs) as well as storage and terminal facilities for natural gas, natural gas liquids, crude and refined products. As we outlined in Part 3 of our “Come Gather ‘Round Pipelines” series last year, PAA own and operate significant takeaway capacity in the Permian – including the Basin pipeline to Cushing, the Mesa and Sunrise pipelines between Midland and Colorado City and (recently acquired) a 50% interest in the 300 Mb/d BridgeTex pipeline from Colorado City to East Houston (Magellan owns the other 50%). As we shall see, PAA also own a large crude gathering system in the Eagle Ford. Outside of Texas the company has midstream assets in the Bakken (see Crude Loves Rock’n’Rail), Western Canada (see Parallel Lines) and the Rockies.

In the Eagle Ford, PAA operates a gathering system in the eastern section of the oil and condensate window of the play that is centered on Gardendale. In this part of the Eagle Ford, most of the liquid hydrocarbons are ultra light “lease” condensates having API gravity above 55 degrees (see Condensate City). Lease condensate presents producers with a challenge because it has variable quality and is not favored by Gulf Coast refineries configured to process crude with fewer light end components – meaning that prices are regularly discounted. In the good old days before shale, when condensate production was low it was simply blended into the regular crude oil stream. With up to 45% of Eagle Ford “crude” production actually falling into the condensate category now, producers have struggled to find domestic markets. In the Summer of last year (June 2014) a new export market for lease condensate opened up as a result of changes in the interpretation of decades old regulations that lumped lease condensate together with crude oil and banned both from export.. Those export regulations – administered by the Department of Commerce Bureau of Industry and Security (BIS) limit the export of crude and lease condensate except to Canada and under a few special circumstances. However the BIS rules do allow exports of processed crude and condensate (i.e. refined products). As we explained in several blogs – (most recently in Ticket to Export ) – the BIS has opened up the market by blessing the export of condensate that has been lightly processed in certain distillation equipment.

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