Permian Crude Oil Takeaway Capacity Boosts Prices, More on the Way

Researched by Industrial Info Resources (Sugar Land, Texas)--The U.S. Energy Information Administration (EIA) reports that thanks to pipeline projects brought online recently, the price of crude oil from the Permian Basin in West Texas and eastern New Mexico is now about the same as a barrel at the storage hub in Cushing, Oklahoma, but still trading at a discount to crude aggregation points in Houston, Texas, showing that more takeaway capacity to the Gulf Coast is needed. Industrial Info is tracking several pipeline projects to move oil out of the Permian.

One of the pipelines that was brought online recently, helping reach a price parity between the Permian and Cushing is Plains All American Pipeline LP's (NYSE:PAA) (Houston, Texas) Sunrise crude oil pipeline from the Permian to Cushing. Construction on the 440-mile pipeline began last summer. The pipeline carries 350,000 barrels per day (BBL/d). The project had an estimated total investment value (TIV) of $500 million. For more information, see Industrial Info's project reports on the Midland-Colorado City pipeline loop, the Colorado City-Wichita Falls loop, and the Wichita Falls-Cushing loop.

Even more Permian takeaway capacity is scheduled to come online in the near future. Among these projects is EPIC Midstream Holdings LP's (San Antonio, Texas) temporary conversion of a natural gas liquids pipeline to carry crude oil. The pipeline runs 400 miles from the Permian to just outside Corpus Christi and will carry 400,000 BBL/d. The conversion project began last summer and is expected to be completed in the near future, opening the door for additional barrels of oil to flow from the Permian to the Gulf Coast. For more information, see Industrial Info's project report.

EPIC is underway with construction on a permanent crude oil pipeline to carry Permian oil to near Corpus Christi. Construction on the 600,000-BBL/d (expandable to 900,000 BBL/d) pipeline began last year and is expected to be completed in the first quarter of 2020. Pumpco Incorporated (Giddings, Texas) is the general contractor on the project, which has an estimated TIV of $1.55 billion. For more information, see Industrial Info's project reports on spreads 1 and 3, Spread 2, and spreads 4 and 5.

Earlier this month, Exxon Mobil Corporation (NYSE:XOM) (ExxonMobil) (Irving, Texas) announced plans to drastically increase its production in the Permian. To this end, ExxonMobil, Plains All American and Lotus Midstream (Sugar Land) is planning a 650-mile crude oil and condensate pipeline from near Wink, Texas, in the Permian Basin, to multiple locations surrounding Houston. The pipeline will carry up to 1 million BBL/d. Construction could begin by the end of this year, for completion in 2021. For more information, see Industrial Info's project report and March 7, 2019, article - ExxonMobil Ratchets Up Capex Plans for 2020-2025.

Jupiter Energy Group (Houston) is in the midst of an extended open season on a proposed crude oil pipeline from the Permian to the Port of Brownsville in Texas. The 650-mile pipeline would carry up to 1 million BBL/d. Construction is planned to begin in 2020 and be completed in the fourth quarter of that year. The project has an estimated TIV of $1.5 billion. For more information, see Industrial Info's project report.

Among the largest Permian crude takeaway projects under construction at the moment is Phillips 66 (NYSE:PSX) (Houston) and Marathon Petroleum Corporation's (NYSE:MPC) (Findlay, Ohio) Gray Oak Pipeline, which will carry up to 900,000 BBL/d (expandable to 1 million BBL/d) of crude from the Permian to the Texas Gulf Coast. Construction on the $2 billion project began late last year and is expected to be completed in early 2020. Multiple contractors are working on the different pipeline spreads. For more information, see Industrial Info's project report.

The race to bring takeaway capacity to the bottlenecked Permian Basin is on, and with all of these projects, the price of barrel of crude in Midland should increase as takeaway capacity is brought online.

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