Plains All American has an extraordinary collection of crude oil gathering systems and shuttle pipelines in the Permian Basin, as well as full or partial ownership interest in a number of long-haul takeaway pipelines to the Gulf Coast and the Cushing hub. As important as many of these individual systems and pipelines may be, it’s the interconnectivity among these assets — and especially Plains’ crude oil terminals in Midland and other West Texas locales — that gives the midstream giant’s Permian infrastructure a value far greater than the sum of its parts. Today, we’ll discuss the important role that Plains’ two terminals in Crane, TX, play in balancing the midstream company’s Permian crude oil delivery network and providing destination optionality.
So far in this series, we have been looking at how storage and distribution hubs in the Permian help to choreograph the transportation of crude oil to end-users and enable traders and others to take advantage of commercial opportunities. In Part 1, we said that Permian infrastructure development has been on a tear the past few years, driven by the once commonly held view that crude oil production there (and production of natural gas and NGLs) was going to rise steadily and substantially through at least the mid-2020s. Crude oil takeaway capacity from the Permian has nearly tripled in the last five years to about 7 MMb/d today and will be closer to 8 MMb/d when the Wink-to-Webster pipeline is fully online. Over the same period, crude oil storage capacity at the seven largest hubs within the Permian has doubled to about 34 MMbbl, with another 4 MMbbl or so in various stages of development and construction. (At least another few million barrels of storage capacity is scattered across the Permian at other smaller sites.)
With our forecast that Permian production — now at 4.5 MMb/d — won’t surpass 5 MMb/d until 2022 at the earliest, the hydrocarbon play appears to have more than enough takeaway capacity. Still, we wonder whether there’s sufficient in-region storage capacity in place, given the need for (1) operational storage to manage inbound and outbound pipeline flows, (2) storage space for commercial purposes such as taking advantage of blending opportunities or price fluctuations (such as contango markets), and (3) space to provide the “capacity cushion” that users of operational storage like to build into their calculations — just in case.
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