Wednesday, December 9, 2015

Active rigs:

	12/9/2015	12/09/2014	12/09/2013	12/09/2012	12/09/2011
Active Rigs	65	190	193	181	200

RBN Energy: running on empty -- Permian Basin refinery and crude gathering system expansions.

Refiners operating in the Permian Basin enjoyed healthy margins over the past four years as takeaway pipeline congestion discounted the price of local crude compared to market centers at Cushing, OK or the Gulf Coast. Although that trend reversed for a few months this summer when a shortage of crude at Midland caused prices to spike higher, the market is once again favoring local purchasers. As a result, refiners have invested in infrastructure to increase deliveries of local crude to their refineries as well as leveraging their gathering pipelines to double as takeaway routes for producers shipping outside the basin.  Today we continue our review of Permian infrastructure build out.

In Episode 1 we summarized the changing balance over the past year between Permian crude production and pipeline takeaway capacity out of the region. With new pipelines coming online since the end of last year to Houston (the 300 Mb/d Plains All American/Magellan Midstream Partners BridgeTex pipeline) Corpus Christi (the 250 Mb/d Plains Cactus pipeline) and Nederland (the 200 Mb/d Sunoco Logistics Permian Express II pipeline) takeaway capacity out of the basin is looking overbuilt – especially considering the new 540 Mb/d Enterprise Products Partners Midland to Sealy pipeline expected online in mid-2017. 

Meantime production overall in the Permian is slowing down although it looks to be still increasing slightly. Yet Permian wells remain among the most productive in U.S. shale plays and drilling continues in the sweet spot areas of the play – the Midland and Delaware basins. Consequently there is considerable pipeline infrastructure being built out to connect new production to the big takeaway pipeline hubs in the Permian.

In Episode 1 and Episode 2 we updated progress on Permian gathering projects first detailed last summer in our “Come Gather ‘Round Pipelines” series. Most of these projects are still on schedule although the focus and scope of some has changed. This time we look first at progress on projects by two Permian refiners to increase crude supply options and then at more recently announced infrastructure projects operated by Energy Transfer Equity subsidiary companies.