October 5, 2018 / 2:24 PM / in 2 months

EPIC plans to haul crude on Permian NGL pipeline in 2019

(Reuters) - EPIC Midstream Holdings LP said on Friday it would convert a portion of its planned natural gas liquids pipeline to transport crude from the Permian basin to the Gulf Coast, as bottlenecks have depressed regional oil prices in the biggest U.S. oilfield.

The third and final phase of EPIC’s NGL pipeline from Crane, Texas to Corpus Christi, Texas will be used for crude oil service, once construction is completed in the third quarter of 2019.

The pipeline will have an additional injection point in Wink, Texas and connect to multiple terminals and refineries in Corpus Christi and Ingleside, Texas. The 24-inch NGL line will have a capacity of 400,000 barrels per day (bp) for its crude service, EPIC said.

Midstream companies have raced to build pipelines as oil production in the Permian basin surged beyond takeaway capacity this year, sending prices in Midland, Texas to the weakest levels in four years compared with benchmark crude in late August.

Prices have since recovered on the sooner-than-expected startup of Plains All American LP’s expanded Sunrise pipeline in early November.

EPIC’s NGL conversion provides further relief for the Permian basin, where production growth is currently stalling due to the transport constraints, and is an interim solution as it works towards bringing on its crude pipeline to service in early 2020.

EPIC also said it would expand the Permian capacity on its crude line to 600,000 barrels per day (bpd) from 440,000 bpd, citing commercial success from its recent open season for committed shippers. With the installation of additional pumps and storage, EPIC can increase capacity further to about 900,000 bpd.

Committed Shippers include Noble Energy Inc, Apache Corp and Diamondback Energy, EPIC said.

West Texas Intermediate (WTI) Midland differentials for the second half of 2019 and beyond has been strengthening on expectations of added pipeline takeaway capacity, traders said.

“Everything past June 2019 has been bid a lot in the past three weeks,” one trader said.

Midland crude differentials for the second half of 2019 are trading at discount of about $4.50 and $4 a barrel, traders said.

“We now see Midland diffs contracting to pipeline economics for at least the last four months of 2019, if not earlier,” analysts at investment firm Tudor, Pickering, Holt said in a note.

“Our previous $8/bbl Mid-Cush (Midland to Cushing) crude differential in Q4 2019 is too wide, and we revise it down to $2.50/bbl.

Reporting by Devika Krishna Kumar in New York; Editing by Susan Thomas and David Gregorio

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