December 29, 2017 / 9:23 PM / 5 months ago

Pipeline projects move ahead to tackle rising Texas shale output

HOUSTON (Reuters) - Several oil pipeline companies this month agreed to move ahead on multi-billion-dollar projects that would link Texas shale fields to Gulf Coast export hubs, offering new outlets for burgeoning output expected in 2018.

A pump jack stands idle in Dewitt County, Texas January 13, 2016. REUTERS/Anna Driver

Crude production from two large Texas shale fields next year is expected to rise about 800,000 barrels per day, researcher East Daley Capital Advisors estimates. Most pipelines will not be finished until 2019, when analysts say existing lines from West Texas will be nearly full.

On Friday, crude prices at the Midland hub in West Texas were $60.66 a barrel, compared with $65.01 a barrel at East Houston. A wide spread encourages producers to sign long-term pipeline contracts to get higher prices.

“If you are a pipeline company, you need to do something now,” said John Zanner, an analyst at consultants RBN Energy LLC. “Pipes are filling up from Midland to the Gulf and how full they are for how long will have an impact on price.”

Pipeline firm EPIC last week said it is going ahead with a 590,000 barrel-per-day (bpd) crude pipeline tying the Permian and Eagle Ford shale basins to Corpus Christi, Texas. The line is expected to begin operation in 2019.

Buckeye Partners last week began seeking shipper commitments for a Permian-to-the Gulf-Coast line that is expected to open in 2019. It will carry up to 600,000 bpd of crude and condensate. In addition, Phillips 66 and Enbridge Inc began soliciting for a proposed crude line that would take 385,000 bpd along a similar route and also begin in 2019. The success of such campaigns usually determines whether construction will proceed.

Enterprise Products Partners earlier this month also said it would convert an existing natural gas liquids line to transport up to 650,000 bpd of crude beginning in the first half of 2020. The line also will run from the Permian to near Houston.

EPIC Chief Executive Phil Mezey said in an interview that the new pipeline will deliver unmingled crude from the two basins. The company already is considering increasing capacity on the Permian leg of the line, he said.

“The advantage is to be able to keep all those barrels separate so marketers are able to gather and ship a clean, neat barrel of Permian or Eagle Ford crude for refiners and exporters,” he said.

Reporting by Bryan Sims; Editing by Leslie Adler

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