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Energy Transfer Partners Plans 600,000-Bpd Permian Oil Pipeline

Energy Transfer Partners plans to build a 600,000-bpd oil pipeline from the Permian to the Houston Ship Channel and Nederland, Texas, as midstream operators race to add takeaway capacity in the fastest-growing U.S. shale play.

The planned ETP pipeline could be “easily expandable” to 1 million bpd, company executives said on the conference call for the Q1 results on Thursday, adding that the new pipeline would likely come into service in 2020.

Booming Permian oil production has started to constrain takeaway capacity from the region, putting downward pressure on Midland crude oil prices compared to the prices in Houston.

“The almost historical widening of that basis will certainly help our margins in the coming quarters,” Reuters quoted senior ETP executive Marshall McCrea as saying.

Crude oil volumes on ETP’s Permian Express 3 averaged “a couple of hundred thousand” barrels of oil per day in Q1, and the company continues to assess possible further expansion of that pipeline, ETP said on the conference call.

Other operators are also announcing plans or commit to projects to move the growing Permian oil production out of West Texas to the ports.

Enterprise Products Partners announced plans in December to convert one of its natural gas liquids (NGL) pipelines from the Permian to the Texas Gulf Coast to crude oil service. The conversion, expected to be completed in the first half of 2020, would provide the partnership with total crude oil pipeline capacity of over 650,000 bpd from the Permian to Enterprise’s crude oil hub in the Houston area.

Related: Goldman: Oil Prices To Hit $82.50 By The Summer

Magellan Midstream Partners and Plains All American Pipeline plan to further expand the BridgeTex pipeline to a capacity of 440,000 bpd to deliver Permian oil from Midland and Colorado City, Texas, to the Houston Gulf Coast area.

Plains All American said in February that the planned Cactus II pipeline capacity is fully committed with long-term third-party shipper contracts totaling 525,000 bpd. The pipeline is targeted to be operational in the third quarter of 2019.

Phillips 66 Partners has received sufficient binding commitments on an initial open season to proceed with construction of the Gray Oak Pipeline system that could transport up to 700,000 bpd from West Texas to destinations in the Corpus Christi and Sweeny/Freeport markets.

Analysts expect the Permian oil production to exceed takeaway capacity by the middle of this year.

“Exactly when that congestion occurs is obviously the big question, but our expectation is that demand will surpass capacity around the second quarter of this year,” Sandy Fielden, director of Oil and Products Research for Morningstar Commodities Research, told Pipeline & Gas Journal in March.

By Tsvetana Paraskova for Oilprice.com

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