Oil and gas pipelines in NM, Texas to solve Permian 'bottlenecks'

Adrian Hedden
Carlsbad Current-Argus

Midstream efforts to push crude oil from the Permian Basin in southeast New Mexico and West Texas to exportation markets in the Gulf of Mexico continued with two more pipeline projects planned to go into service by the end of 2019.

The Grey Oak Pipeline – a joint venture between pipeline company Phillips 66 Partners and Andeavor was expected to be operational by the end of the year.

It would stretch 850 miles from the Permian Basin region, starting near Reeves County, Texas and continuing through the region to destinations in Corpus Christi, Sweeney and Freeport, Texas, per a news release.

With customer commitments, the pipeline will carry a capacity of about 900,000 barrels per day.

More:Oil giants to boost production in the Permian Basin in NM and West Texas

A map of the Grey Oak crude oil line, stretching from The Permian Basin to the Gulf Coast.

Open seasons were held in April and September 2018.

The line will provide benefits to local communities along the way, stimulating local construction, restaurant and hospitality industries, read the release.

“Local economies will see long-term benefits from property tax revenues from the new pipeline,” the release read.

“We will be creating full-time positions in some communities where storage facilities will be located. Local services like restaurants, hotels, grocery stores and gas stations can expect to see increases in business during the construction phase.”

More:Another pipeline prepares to take crude oil from Permian Basin to Gulf Coast

Origin points for the Grey Oak Pipeline will be in Reeves, Loving and Winkler counties, read the release, along with locations in the Eagle Ford region of southern Texas.

Another proposed pipeline servicing natural gas liquids (NGLs) in the region was expected to go into service by the third quarter of 2019.

The Grand Prix Pipeline, a subsidiary of Targa Resources announced its open season on March 1, continuing until the end of the month.

It will have a capacity of about 300,000 barrels of NGLs per day, with the option to expand to about 550,000 barrels per day.

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That line will take the NGLs from plant production in Lea County, to a natural gas processing facility in Midland County, Texas and then to storage facilities in Mont Belvieu, Texas near Houston and the Gulf Coast.

Targa also announced that the Grand Prix Pipeline will extend into southern Oklahoma, using “long-term” commitments, read the release, for both transportation and fractionation services in Arkoma, Oklahoma – near the state’s border with Arkansas.

"We are very pleased to have entered into agreements to provide services across our integrated platform supported by a large acreage position held by a major Delaware Basin customer. This is a significant extension of our multi-plant, multi-system Delaware footprint, adding infrastructure through the core of the Delaware Basin,” said Joe Bob Perkins, Targa Chief Executive Officer.

“Also, the expansion of our Grand Prix NGL Pipeline into Oklahoma is an attractive extension of a highly strategic asset for Targa, enhancing the capabilities we can offer our existing and potential customers in southern Oklahoma.”

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The company also planned to construct 220 miles of 12- to 24-inch gas gathering lines across the “most prolific” portions of the Delaware Basin – New Mexico’s side of the Permian.

A new cryogenic natural gas processing plant, known as the “Falcon Plant” was planned for the Delaware Basin area and expected to begin operations by the end of 2019.

By the second quarter of 2020, Targa plans to begin operations of another processing plant in the Delaware Basin known as the “Peregrine Plant.”

Both of those facilities will have a daily capacity of 250 million cubic feet of natural gas per day.

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Pipes to address Permian’s ‘bottleneck’ problem

More pipelines mean more oil and gas can be transported out of the Permian Basin – where the U.S. Geological Survey announced in November 2018 the discovery of the one of the largest shale deposits in U.S. history.

The region could nearly double its crude oil production by 2023, read a Gray Oak news release, accounting for 60 percent of the world’s production growth during that time.

“New pipelines ensure new energy being found and produced in North America can get from production sites to refineries, manufacturers and, ultimately, consumers in various forms,” read the release. “They provide a vital link between energy resources and refineries, helping increase U.S. energy security and independence.”

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Todd Staples, president of the Texas Oil and Gas Association said more lines are needed to continue to the objective of establishing the U.S. as a global leader in energy production. 

“Expanding energy infrastructure like pipelines is the best way to increase energy reliability and security,” he said. “The necessary services that pipelines deliver are indispensable.”

Robert McEntyre, spokesman for the New Mexico Oil and Gas Association (NMOGA) said midstream projects such as pipelines and gas processing facilities are essential to increasing carry capacity and sustaining the industry’s continued growth.

“Given the growth that we’ve seen, the need for these investments is tremendous,” McEntyre said. “It continues to grow. This is absolutely part of the solution to remove bottlenecks. “It will help get crude oil out of the Permian and increase the takeaway capacity for natural gas.”

More:Environment concerns grow as New Mexico ups oil and gas leases

This chart shows the trends in New Mexico rig counts since 2000.

Steve Everly, spokesman for Texans for Natural Gas said adding pipelines will sustain the ongoing oil and gas boom in the area, using market-driven solutions to increase carry capacity and reduce emissions.

He said 14 billion cubic feet per day in new natural gas pipeline capacity is set to go into service by 2022.

“The Permian Basin is a key part of America’s rise to energy dominance. To ensure that the Texas oil and gas boom continues, we need more pipelines,” Everly said.

“This will not only help reduce flaring, but will also ensure that we have the infrastructure necessary to meet increasing demand for Texas natural gas – at home and abroad.”

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Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.