Argus Summit: Permian bottleneck looming
Houston, 18 January (Argus) — Growing crude production out of the Permian basin in Texas and New Mexico will create a bottleneck in the coming years as pipeline capacity will be maxed out, midstream companies said.
There is currently enough pipeline capacity but Permian production is growing rapidly and at some point, there is "going to be a day of reckoning," Enterprise Products Partners senior vice president Brent Secrest said at the Argus Americas Crude Summit in Houston, Texas.
The bottleneck will likely start in late 2019 or 2020, said Magellan's head of commercial crude Robert Barnes. "You are going to run into another wall for infrastructure capacity," he said.
Midstream companies have expanded existing systems and are planning new lines to accommodate the expected growth in the Permian. Most of the projects target the US Gulf coast amid rising interest in exporting US crude.
Enterprise is ramping up a new oil pipeline which will add 450,000 b/d of takeaway capacity from its Midland, Texas, terminal to its Sealy storage facility west of Houston, which is connected to the company's Echo terminal. The line, when in full service, will include four segregations for West Texas Sour (WTS), West Texas Intermediate (WTI), higher-gravity crude (dubbed Light WTI) and condensate.
Limited service started in November 2017 and the line is expected to be at full capacity by the second quarter of this year. The line is currently only moving WTI quality crude, Secrest said.
Magellan is also building out Permian infrastructure. The company has ordered the pipe for a
250,000 b/d crude and condensate pipeline from Wink to Crane, Texas, in the Permian's Delaware basin. Crane is the origin point of Magellan's 275,000 b/d Longhorn pipeline which carries Permian crude to Houston.
Magellan is also holding an open season for a project to move Permian and Eagle Ford crude to Corpus Christi, Texas. It will move from Crane to a location near Three Rivers in Texas, and connecting lines to Houston and Corpus Christi. The system would have an initial capacity of at least 350,000 b/d with the ability to expand up to 600,000 b/d for each destination.
Other companies, including Plains All American Pipeline and Buckeye Partners, are weighing projects to move crude from the Permian to Corpus Christi.
Magellan also said today it is conducting preliminary engineering work on a possible oil export terminal off the coast of Texas that could accommodate Very Large Crude Carriers (VLCCs).
Enterprise had explored an offshore import facility years earlier, known as the Texas Offshore Port System (TOPS), but scrapped the project. Secrest was skeptical that building a new offshore facility would be feasible in the current market.
"I struggle to see how the numbers work," he said.