Energy Play Highlight: Eagle Ford's Takeaway Capacity Far Exceeds Demand

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Researched by Industrial Info Resources (Sugar Land, Texas)--The prolific Eagle Ford Shale has been a hotbed of drilling and development for the past several years as access to its oil has improved. While its primary products have been on the lighter side, including natural gas, natural gas liquids (NGLs) and light crude oil/condensate, its proximity to the Gulf Coast has given refiners in the region access to a nearby, and thereby inexpensive, source of crude. As such, midstream companies have rushed to develop more pipeline infrastructure that takes those hydrocarbons into the refiners' and gas processers' backyards.

With the drop in oil prices, however, production has been pulled back as well. As a result, the takeaway capacity built to accommodate rapid growth in production remains excessive. That excess is something to the tune of 400,000 barrels per day (BBL/d) of crude oil/condensate alone.

According to Industrial Info's research, there are 12 pipelines that carry crude oil out of the Eagle Ford to refiners in either the Corpus Christi or Houston areas, representing about 2.1 million BBL/d of takeaway capacity. However, total takeaway capacity cannot be measured in pipeline capacities alone. Crude-by-rail represents a not-insignificant 155,000 BBL/d of takeaway capacity, as well as local refineries, such as the 100,000-BBL/d Three Rivers Refinery, owned and operated by Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas). The local refineries account for roughly another 129,000 BBL/d of local demand. In total, the Eagle Ford's takeaway capacity adds up to more than 2.3 million BBL/d.

Current production in the Eagle Ford has fallen from a high of 1.71 million BBL/d in March 2015 to 1.68 million BBL/d in May, according to data from Bentek Energy (Denver, Colorado). Even accounting for an additional 200,000 BBL/d of Permian crude oil entering the region via the 200,000-BBL/d Cactus Pipeline by Plains All American Pipeline LP (NYSE:PAA) (Houston), the total amount of crude that needs to be moved out of the Eagle Ford does not exceed 1.9 million BBL/d. This leaves the Eagle Ford with 200,000 BBL/d of excess pipeline takeaway capacity, and as much as 400,000 BBL/d of excess total takeaway capacity.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.