En Español

Very usefull links


News links




Dow Jones

Oil price



Views and News






U.S. oil pipeline rivals look to consolidate West Texas Permian Basin projects




By Rod Nickel, Bryan Sims

Petroleumworld 10 16 2017

As shale oil producers have rushed back into the Permian Basin after a downturn, U.S. pipeline firms have scrambled to plot new pipelines to take all that petroleum from West Texas to refineries, export hubs and petrochemical plants.

But operators with plans for up to 20 new lines are now selling stakes in some of those projects amid concerns that production could fall short of the volumes needed to fill them.

“I suspect some projects will disappear altogether,” said Roberto Simon, Americas head of natural resources and infrastructure for investment bank Societe Generale. “Not every one is going to be viable.”

The shakeout comes despite record crude volumes being pumped now in the Permian, the largest U.S. oilfield, after a two-year downturn that started in 2014.

Production from the Permian Basin is up 24 percent since the year began, to 2.6 million barrels per day. It has sold at a discount since August to benchmark crude oil stored at Cushing, Oklahoma, according to Reuters data, a reflection of congested pipelines.

But the competing pipeline projects, taken together, would add an enormous amount of pipeline space that even record production might not fill. If all nine new or expanded crude lines were built, it would nearly double the region's current capacity of 2.4 million barrels per day.

Rather than compete for the same customers, the pipeline firms are seeking to cut deals to ensure they can guarantee the energy supplies to fill the lines. None have formally dropped out of the competition, but a hunt for partners signal that the winnowing process has begun.

“There is a lot of money chasing the opportunity right now,” said Whit Keuer, a partner in consulting firm Bain & Company's oil and gas practice. “We would expect a pretty big shakeout.”

Kinder Morgan and DCP Midstream LP last week signed Targa Resources Corp as an investor in their natural gas pipeline project. Targa separately sold a 25 percent stake in its proposed gas liquids line out of West Texas to Blackstone Energy Partners.

Kinder Morgan declined to comment. DCP and Targa did not respond to requests for comment.

NuStar Energy, which plans a $1-billion crude pipeline out of the Permian, is in talks with other companies about selling a stake and obtaining access to fuel in the region, said Danny Oliver, NuStar's senior vice-president of marketing and business development.

“If it puts us ahead of the competition and gets a deal done, we would be absolutely open to something like that,” he said.

Some analysts say output can accommodate many of the new transportation lines. Permian production - which accounts for the vast majority of U.S. output gains - should rise through 2026, estimates Alex Beeker, senior research analyst at consultancy Wood Mackenzie.

Others think it could peak sooner. U.S. oil output could experience a final spike next year before growth flattens as rising costs make it unprofitable to drill many fields, Ian Taylor, chief executive of oil trader Vitol, said this week.

Gas pipeline operators are also recalibrating expansion plans.

NAmerico Partners LP, which is competing with Kinder Morgan to develop a Permian to Gulf Coast pipeline able to move nearly 2 billion cubic feet of natural gas per day, is in “very active discussion” about selling stakes, said managing partner Jeff Welch.

NAmerico would swap equity for a producer's volume commitment or join with another pipeline and gas gathering company if it would help provide access to more natural gas, he said.

Privately held Permico Energia, which is planning a liquid natural gas pipeline, is negotiating a potential sale of a stake to energy producers for cash and a supply commitment, said Chief Executive Jeff Beicker.

Permico would consider folding in its project with another pipeline if one approached Permico with a strong case for a consolidation, he said.

Some firms aren't looking for partners. EPIC Y Grade Pipeline LP, which struck a deal with BP plc last month to use its proposed 650-mile natural gas liquids pipeline, feels confident enough to go it alone, said Chief Executive Phil Mezey.

It still would welcome supply deals with more energy producers and processors, he said.

The competition for deals to fill the pipelines is so fierce that margins for operating the lines are likely to be thin without consolidation, said Libby Toudouze, portfolio manager at Cushing Asset Management, which invests in energy producers and transportation companies.

Private equity investors have so much capital to invest that they are willing to do so at prices that might not initially produce profits, she said.

“You've got some competition in there that is willing to be a loss leader,” Toudouze said.

Story by Rod Nickel, Bryan Sims; Editing by Gary McWilliams, Simon Webb and Brian Thevenot from Reuters.

reuters.com 10 13 2017

We invite all our readers to share with us
their views and comments about this article.
Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Nov 13-14 ;
Mexico City, Mexico





Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld ™  / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.