Shale plays

Shale prefers TX delivery over OK.


Even though Cushing, OK is the delivery point for CME/NYMEX benchmark WTI, most of the recent pipeline projects focused on delivering Permian and Bakken crudes have endpoints on the US Gulf Coast and do not pass through Cushing. A new Enterprise line just recently started carrying crude from Midland to Sealy. Phillips 66/Enbridge and Plains are both planning to build pipelines that run from the Permian basin to the Gulf Coast. Two Energy Transfer pipelines (Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline) carry Bakken crude directly to Nederland, TX without moving through Cushing.

In the week ended Dec. 29, pipeline EPIC said it will move ahead with a 590K-b/d pipe that will tie the Eagle and Permian shale plays to Corpus Christi, TX. This line is expected to begin operation next year. EPIC CEO Phil Mezey said the new pipe will deliver unmingled crude from the two basins. "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." Mr. Mezey said EPIC was already looking at expanding the Permian leg of the line. That same week Buckeye Partners began seeking shipper commitments for a 600K-b/d Permian-to-Gulf-Coast crude and condensate line that is also expected to open in 2019. Earlier in Dec. Enterprise Products Partners said it would convert an existing natural gas liquids (NGLs) line to transport up to 650K b/d of Permian crude to near Houston. This line would begin operations in H1 2020.

Meanwhile, Permian basin's associated gas needs outlets. Since this gas output is a byproduct of crude production, output continues to grow despite slack demand. Pipelines are planned to bring the Bakken gas to areas of higher demand, but none are likely to begin pumping for 1-2 years. In the meantime, bottomed-out prices will not discourage production as long as crude economics remain positive. (Dec 29, RBN/Jan 1)

Source: Worldwide Refining Business Digest Weekly.e, January 8, 2018.


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