Bottlenecks have become a problem in the Permian Basin of Texas and New Mexico at the center of the shale boom, opening up opportunities for pipeline builders to expand their businesses.
Drillers are pumping so much oil and gas that pipelines considered more than adequate just a few years ago now are overwhelmed, The Wall Street Journal reports.
To solve the issue, Epic Midstream Holdings LP said last year it would build its first oil pipeline in America’s most active oil field. It won’t be finished until next year, but the company is already considering making it bigger.
The upstart company, backed by private equity, had been planning to build a conduit capable of carrying 440,000 barrels a day from West Texas to Corpus Christi on the Gulf Coast. Now, it’s considering enlarging it to 675,000 barrels a day, after interest picked up in recent months.
Epic Midstream Holdings, Plains All American Pipeline LP, and Phillips 66 in a partnership with refiner Andeavor are building new oil pipelines aimed at Corpus Christi that are set to add upward of 1.8 million barrels of combined capacity late next year.
“We’re getting a lot of encouragement from Permian producers to accelerate,” says Phillips 66 Chief Executive Greg Garland. “For the past six months the interest level has been high and remained very high.”
The Permian’s bottlenecks are causing some of the region’s oil and gas to trade at steep discounts to benchmark prices. Producers selling oil in Midland have recently fetched about $16 a barrel less than what sellers are getting in Oklahoma, according to RBC Capital Markets.
Some analysts, however, say the new pipelines could face delays and increased costs, which could be get worse as a result of President Donald Trump’s 25% tariffs on steel imports.
