ETP to build new Permian crude pipeline: Update

Updates with Permian Express 3 crude flow.

US midstream company Energy Transfer Partners (ETP) is forging ahead with a 600,000 b/d crude pipeline from the Permian basin to its Nederland hub in southeast Texas as it expects Permian crude to remain at deeper discounts to other benchmarks for at least two years.

"There are certainly some tough times probably coming" for Permian drillers, ETP chief operating officer Marshall McCrea said today on a conference call. "We in the [midstream] industry are doing everything we can as quickly as we can."

The WTI Midland discount to WTI Houston nearly hit $16.80/bl last week. It has narrowed slightly since then, but ETP said increasing production will bump up against mostly stagnant pipeline takeaway capacity for the foreseeable future.

ETP floated a new pipeline in its last quarterly earnings call in February, saying it was looking for "strategic partners". While it was ready to announce a 30-inch pipeline to the two major upper Texas coast destinations that would be in place in 2020, it did not name that partner.

The line could feed ETP's 480,000 b/d Bayou Bridge pipeline into Louisiana, which it still anticipates will be complete by the end of the year despite a state judge's ruling last week barring further work near the St James terminus. Bayou Bridge moved 145,000 b/d to Lake Charles, Louisiana, in the first quarter, same as in the previous three months.

ETP added that the new, unnamed pipeline is expandable to 1mn b/d, similar to the Phillips 66-Andeavor Gray Oak pipeline, which for now is a planned 700,000 b/d crude line from the Permian to Corpus Christi, Texas, due on stream by the end of 2019.

Plains All American Pipeline plans to have 500,000 b/d of new capacity into north Texas on its Sunrise 1 and 2 project by early next year and its 670,000 b/d Cactus 2 line to Corpus Christi done in late 2019.

Before its latest cross-state pipeline is in service, ETP said a further expansion of its recently inaugurated Permian Express 3 could be done by next year.

A 50,000 b/d open season on that project is imminent, and McCrea said it ran about 200,000 b/d in the first quarter, more than the 100,000 b/d capacity the company previously has disclosed.

The company also is "likely" to try linking Permian crude to Corpus Christi, joining Gray Oak and Cactus 2, but it does not have a firm plan yet.

"We are not only looking at new [pipeline] lay in that direction but also looking at existing pipeline to get that business," McCrea said. "But the focus right now is Nederland-Houston."

ETP reported an $879mn profit in the first quarter, more than doubling from $393mn in the year-prior period.