... 2019 U.S. Oil Pipeline Report: Permian Production Spurs New Projects

2019 U.S. Oil Pipeline Report: Permian Production Spurs New Projects

U.S. energy production continues to expand rapidly, as 2018 marked the most profitable year for U.S. oil producers since 2013.

Production in the Permian Basin has been especially strong. Earlier this year, both ExxonMobil and Chevron announced plans to increase activity in the Permian Basin of West Texas and southeastern New Mexico.

ExxonMobil plans plans to produce more than 1 million barrels per day (bpd) of oil-equivalent in the Permian by as early as 2024 — an increase of nearly 80 percent. The anticipated increase in production will be supported by further evaluation of the company’s activities in the Delaware Basin, infrastructure development plans and secured capacity to transport oil and gas to ExxonMobil’s Gulf Coast refineries and petrochemical operations through the Wink-to-Webster, Permian Highway and Double E pipelines.

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Chevron’s outlook is supported by strong performance in the Permian, where the company has added almost 7 billion barrels of resource and doubled its portfolio value over the past two years. Permian unconventional net oil-equivalent production is now expected to reach 600,000 bpd by 2020 and 900,000 bpd by 2023.

Other companies, including BP PLC, Royal Dutch Shell PLC and Occidental Petroleum Corp., have also considered increasing activity in the Permian. The only problem is pipeline capacity is falling short of demand. A number of companies are responding to the issue, announcing new pipelines to help get Permian Basin production to the consumer.

Meanwhile, the long-delayed Keystone XL project has returned to the forefront, as full construction was set to begin this year in Montana, North Dakota, South Dakota and Nebraska. One judge halted construction activity, but President Donald Trump has renewed support for the project.

In addition, a number of other projects have been humming along as the 2019 summer construction season ramps up. What follows is an overview of the oil-related pipeline projects currently under way or in the development process.

Cactus II Pipeline

Location: Texas
Stakeholder(s): Plains All American Pipeline
Overview: On Feb. 22, Plains announced that the Cactus II Pipeline was fully committed with long-term third-party contracts. The pipeline will have an initial capacity of 585,000 bpd, extending from the Permian Basin to the Corpus Christi/Ingleside area in Texas. Cactus II has committed contracts for capacity totaling 525,000 bpd, composed of 425,000 bpd of long-term minimum volume commitments and an additional 100,000 bpd of commitments associated with long-term acreage dedications. Approximately 60,000 bpd is reserved for walk-up shippers. Plains is expected to retain 65 percent ownership and will serve as operator. The Cactus II pipeline system will have origination points at Orla, Wink, Midland, Crane and McCamey, Texas. The system includes a combination of capacity on existing pipelines and two new 26-in. pipelines and is expandable to approximately 670,000 bpd through the addition of incremental pumping capacity. The first new pipeline will extend from Wink to McCamey, and the second new pipeline will extend from McCamey to the Corpus Christi/Ingleside area, and have flexibility to access multiple docks. The capital cost of the two new pipelines is expected to total approximately $1.1 billion.

Cimarron Express Pipeline

Location: Oklahoma
Stakeholder(s): Kingfisher Midstream, Alta Mesa Resources, Blueknight Energy Partners, Ergon Inc.
Overview: Cimarron Express Pipeline LLC is a joint venture project that will include the construction and operation of a new crude oil pipeline serving STACK producers in central Oklahoma with a 65-mile, 16-in. crude oil pipeline extending from northeastern Kingfisher County, Oklahoma, to Blueknight’s crude oil terminal in Cushing. The pipeline will provide direct market access at Cushing for producers and will have an initial capacity of 90,000 bpd, expandable to more than 175,000 bpd. Concurrent with the formation of Cimarron Express, Alta Mesa executed a long-term acreage dedication and transportation agreement with Cimarron Express, which incorporates approximately 120,000 net acres in Kingfisher and Garfield counties. Under the terms of the agreement, Blueknight will construct and operate the pipeline. The receipt terminal for the Cimarron Express pipeline will be located at Kingfisher Midstream’s crude oil storage facility in northeastern Kingfisher County. The pipeline will connect to Kingfisher Midstream’s crude oil gathering system and truck unloading facilities at the company’s crude oil facility. The new pipeline is expected to be completed in mid-2019.

EPIC Crude Oil Pipeline

Location: Texas, New Mexico
Stakeholder(s): EPIC Midstream Holdings, Ares Management, Apache Corp., Noble Energy
Overview: The EPIC Crude Oil Pipeline will extend from Orla, Texas, to the Port of Corpus Christi. The project includes terminals in Orla, Pecos, Saragosa, Crane, Wink, Midland, Helena and Gardendale, with Port of Corpus Christi connectivity and export access. It will service the Delaware, Midland and Eagle Ford Basins. The pipeline will run side-by-side with the EPIC Natural Gas Liquids (NGL) Pipeline for 730 miles, from southeastern New Mexico to Corpus Christi. It will have an initial capacity of 590,000 bpd. More than 500,000 acres have been dedicated to the EPIC Crude Oil Pipeline. Right-of-way is 100 percent secured for the first two phases. The crude system is expected to be in service in the second half of 2019.

Gray Oak Pipeline

Location: Texas
Stakeholder(s): Phillips 66 Partners, Andeavor, Enbridge
Overview: Gray Oak Pipeline LLC is a joint venture owned 75 percent by Phillips 66 Partners and 25 percent by Andeavor. The pipeline will be built and operated by Phillips 66, spanning 850 miles from the West Texas Permian Basin to the Gulf Coast. The pipeline will create reliable access to crude oil in the region, bringing more growth to the Texas energy industry. It will also connect to market centers in Sweeny and Freeport, Texas. Gray Oak will help new energy being found and produced in Texas get to refineries, manufacturers and, ultimately, consumers. The pipeline is expected to be in service by the end of 2019.

Jupiter Pipeline

Location: Texas
Stakeholder(s): Jupiter Energy Group
Overview: The Jupiter Pipeline is a proposed 650-mile, 36-in. diameter crude oil pipeline to serve the Permian Basin in Texas. The pipeline will have origin points near Crane and Gardendale/Three Rivers and an offtake point in Brownsville. The pipeline will provide access to all three deep water ports in Texas (Houston, Corpus Christi and Brownsville) and will have direct access to a fully capable VLCC (very large crude carrier) loading facility off coast at Brownsville. At the Brownsville terminus, the Jupiter Pipeline will connect to the Jupiter Brownsville Terminal, which will consist of up to 10 million barrels of storage, three docks in the Port of Brownsville and an offshore VLCC loading facility. Jupiter Energy Group extended an ongoing open season for binding shipper commitments until May 31. The Jupiter Pipeline is expected to be operational in the fourth quarter 2020.

Keystone XL Pipeline

Location: Alberta to U.S. Midwest and Southeast
Stakeholder(s): TransCanada
Overview: The Keystone XL Pipeline Project is a proposed 1,179-mile, 36-in. diameter crude oil pipeline from Hardisty, Alberta, to Steele City, Nebraska. At an estimated cost of $8 billion (USD), the pipeline will transport crude oil from Canada, as well as the Bakken shale region of Montana and North Dakota. The pipeline will have capacity to transport 830,000 bpd to Gulf Coast and Midwest refineries. The project ran into another setback after a U.S. District Court Judge Brian Morris ruled in November that TransCanada couldn’t move forward with work to prepare for construction in Nebraska. President Donald Trump granted the project a new presidential permit on March 29, superseding the one he signed in 2017. The Trump administration and TransCanada have asked the 9th U.S. Circuit Court of Appeals to reverse the lower court ruling to allow construction to proceed.

Line 3 Replacement

Location: North Dakota, Minnesota, Wisconsin
Stakeholder(s): Enbridge
Overview: Line 3 is an existing 1,097-mile crude oil pipeline, originally installed in the 1960s, from Edmonton, Alberta, to Superior, Wisconsin, and is an integral part of Enbridge’s Mainline System. The Line 3 Replacement Program is an integrity and maintenance driven project, and spans from Hardisty, Alberta, to Superior and consists of 1,031 miles of 36-in. diameter pipeline. The U.S. portion of the Line 3 Replacement Program consists of replacing the pipeline from Neche, North Dakota, through Minnesota, to Superior. The line is physically equipped to transport all grades of crude oil, based on shipper demand. Upon replacement, the average annual capacity of Line 3 will be 760,000 bpd. The project is estimated to cost $7.5 billion. Enbridge expects to remaining portion of the project to be in service by the end of 2020.

Permian Basin to Cushing Pipeline

Location: Texas, Oklahoma
Stakeholder(s): Plains All American Pipeline LP
Overview: The proposed Permian Basin to Cushing Pipeline could add up to 350,000 bpd of takeaway capacity in the region. Originating in Midland and Colorado City, Texas, the pipeline would deliver crude to Plains’ terminal in Cushing, Oklahoma. Plains All American announced an open season to attract shipper commitments on April 18, running until May 30. Pending a successful open season and permitting approvals, the pipeline could be operational by mid-2019.

Roanoke Expansion Project

Location: Louisiana, Mississippi, Virginia
Stakeholder(s): Kinder Morgan, Plantation Pipe Line Co.
Overview: The Roanoke Expansion will provide for approximately 21,000 bpd of incremental refined petroleum products capacity on the Plantation Pipe Line System from the Baton Rouge, Louisiana, and Collins, Mississippi, origin points to the Roanoke, Virginia area. The expansion will primarily consist of additional pump capacity and operational storage on the Plantation system. Kinder Morgan announced in December 2018 the conclusion of a successful open season to secure long-term committed volumes of 20,000 bpd. The Plantation Pipe Line Co.’s investment in the project is approximately $49 million. In addition, Kinder Morgan Southeast Terminal’s (KMST) investment, fully backed by 10,000 bpd of long-term committed volumes, is approximately $9 million. The project is expected to be in service by April 1, 2020.

This is not a comprehensive list of the pipeline projects for the upcoming construction season. For updates regarding ongoing projects, refer to the Project Roundup on page 16 and published each issue.

North American Oil & Gas Pipelines provides quarterly reports of Canadian and U.S. pipeline projects. A report on Canadian oil pipeline projects appeared in the March issue, and upcoming reports on Canadian and U.S. gas pipeline projects will appear the July/August and October issues, respectively.

Bradley Kramer is managing editor of North American Oil & Gas Pipelines. Contact him at bkramer@benjaminmedia.com.

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