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Medallion Midstream has announced the end of its binding open season for commitments from crude oil shippers for two extensions in its Wolfcamp pipeline system that will see its capacity increase by a combined 120,000 bpd. The Wolfcamp Basin is one of the sweetest spots in the Permian shale play, after last year the U.S. Geological Survey reassessed its reserves, saying that now it may hold as much as 20 billion barrels of recoverable crude oil.
The expanded system will begin partial operation by the end of September and will become fully operational by the start of 2018. It will involve two separate capacity extensions, one of the Wolfcamp Connector mainline and one of the Howard Lateral. The Connector’s capacity will be increased from 105,000 bpd to 200,000 bpd, and the capacity of the Howard Lateral will rise from 60,000 bpd to 85,000 bpd.
A binding open season involves oil shipping service providers and pipeline companies closing precedent agreements, which make the basis for a consequent transportation agreement. The latter guarantees that the expanded pipeline capacity will be utilized.
The announcement comes soon after a federal judge in DC ordered a new assessment of the environmental impact of the controversial Dakota Access pipeline that last year led to several months of protests. The judge did not order the suspension of operations of the newly opened pipeline, but the groups protesting it have vowed to demand the suspension.
In a context of so much opposition to pipelines, the expansion of the Wolfcamp system becomes certainly noteworthy. The Wolfcamp Basin is just a small part of the Permian play, which is considered to hold massive reserves of oil and gas.
The Permian is the fastest-growing shale play in the U.S., with output this month expected to reach 2.49 million barrels daily – more than 25 percent of the country’s total crude output. What’s more, according to the chief executive of Occidental Petroleum as quoted by Bloomberg, output from the Permian could grow to 4-5 million bpd in the future.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.