Wide Open Spaces, Part 3 - Getting Permian Crude Oil to Wherever It Needs to Go

Every day, another 4.5 million barrels of Permian crude oil begin the journey from wells in West Texas and southeastern New Mexico to refineries in the U.S. and abroad. For most of that oil, it’s no simple trek. Not only does it wend its way through gathering systems and shuttle pipelines to nearby hubs, it often needs to be directed between terminals within those hubs to reach the specific outbound, long-haul pipe that will take it to where it needs to go. We get it — you probably don’t need to know about every nook and cranny in the multi-terminal hubs at Midland, Crane, Wink, and elsewhere in the Permian, but it sure would help to understand generally how the flow of oil to market works, and why a terminal’s ability to provide destination flexibility is so crucial. Today, we continue our series on Permian hubs and terminals with a real-world example of how a barrel of Delaware Basin crude oil moves to Corpus Christi, Houston, or Cushing.

As we said in Part 1, storage and distribution hubs play critical roles in choreographing the transport of crude oil from the lease to end-users and in enabling traders and others to take advantage of commercial opportunities. This is especially true in the Permian, the U.S.’s leading oil-producing region, where a number of hubs have developed over the past few years to keep pace with production growth and pipeline build-outs. We also questioned the widely held view that the sudden fall-off in Permian production last year and the current expectation for only modest production growth in 2021 and beyond has left the region overbuilt from a midstream infrastructure perspective. In fact, while the Permian generally has sufficient takeaway capacity, there has been recent evidence of tightness in the Permian storage market.

In Part 2, we zoomed in on the hub in Crane, TX, which has a slew of inbound pipelines from the Delaware Basin and a handful from the Midland Basin; 10 terminals with a combined storage capacity of about 7 MMbbl (including about 1 MMbbl now under construction); and direct or indirect connections with just about every takeaway pipeline to the Cushing hub or the Gulf Coast (Corpus Christi, Houston, Beaumont/Nederland, you name it.)

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