Oil, natural gas facilities coming to Permian Basin; coronavirus threatens oil prices

Adrian Hedden
Carlsbad Current-Argus

Service began at a new Permian Basin natural gas processing plant last week in West Texas, the seventh owned by the Houston-based company.

Energy Products Partners announced the activation of its cryogenic natural gas processing plant in Loving County, Texas near Mentone about 40 miles south of Malaga at the state line.

The facility had an initial capacity to process about 300 million cubic feet per day (mmcf/d) of natural gas, and the ability to extract more than 40,000 barrels per day (BPD) of natural gas liquids (NGL).

Keep up with the Permian Basin oil boom. Subscribe to the Carlsbad Current-Argus.

The project was supported by a long-term acreage dedication and was intended to continue to grow the company’s operations in the Permian Basin.

Brent Secrest, Enterprise executive vice president said the new facility boosted the company’s capacity in the Delaware Basin – the western portion of the Permian – to more than 1.6 mmcf/d with more than 250,000 BDP of NGL extraction.

He said the plant would also provide additional service NGL and natural gas producers throughout the region spanning from West Texas to southeast New Mexico.

More:Study: Eddy County leads New Mexico oil and gas industry, Permian to last for decades

“These assets provide critical infrastructure to facilitate growing natural gas and NGL production in the region, which is expected to increase by more than 60 percent over the next five years,” Secrest said.

"The addition of Mentone also enhances access to our fully integrated midstream network of assets linking producers in the Delaware Basin to domestic and international demand.”

Enterprise also built 66 miles of gathering and residue pipelines to link the Mentone facility to the company’s NGL and natural gas pipeline networks and is in the process of building a fractionation facility with a 300,000 BPD capacity in Mount Belvieu, Texas.

More:Oil and gas developments to be sped up by New Mexico House bill

Crude line connects Permian to export markets

An open season was concluded for a crude oil pipeline company seeking shippers for a line that would carry crude from Midland, Texas to nearby Crane, Texas where it could then be placed into a long-haul line to the export markets along the Gulf Coast.

Centurion Pipeline L.P., a subsidiary of Lotus Midstream, announced the completion of the open season in a Jan. 21 news release, for its Augustus Pipeline which would use a combination of new and existing pipeline.

It would have an initial capacity of about 150,000 barrels per day and could be expanded in the future.

More:Oil and gas industry eyeing Chaves County in upcoming oil and gas land auction

The pipeline was expected to go into service by the end of 2020.

Lotus Midstream Chief Executive Officer Mike Prince said the project was intended to respond to the growing Permian Basin and subsequent need for crude oil to be processed and exported.

“We are pleased to be able to offer shippers a service that will provide connectivity between the Midland and Crane crude oil markets and provide shippers with access to multiple long-haul pipelines originating at Crane for delivery to the Corpus Christi and Houston markets,” he said.

“Centurion Pipeline’s assets are strategically positioned throughout the Permian Basin, and the Augustus Pipeline will provide shippers access to the growing crude oil market at Crane.”

More:New Mexico's oil and gas surplus could fund land conservation projects if bill passes

Oil continues price tumble as coronavirus threatens Asia

The price of American oil was at a three-month low, as West Texas Intermediate (WTI) was trading at about $53 per barrel as of Thursday, per data from Nasdaq.

WTI fell by about $10 per barrel in the last month from a Jan. 3 peak of about $63 per barrel – the highest since the start of 2020.

Thursday’s price was the lowest since October 2019 showed a dip to about $52 per barrel, before WTI recovered throughout November and December, remaining in the upper $50s.

More:New Mexico's oil and gas regulators hope funding requests will strengthen operations

The recent decline was blamed on the spread of coronavirus in parts of Asia threatening a major energy market and one of the world’s largest economies in China, read a report from Enverus.

Early-year support for domestic oil prices were bolstered by an apparently forthcoming resolution in U.S. and China trade negotiations, but that confidence was rapidly dashed by reports of the virus spreading across the continent.

“Whatever small amount of support there was behind higher crude prices after the signing of the interim US-China trade agreement crumbled in spectacular fashion last week,” the report read.

“News of the spread of Wuhan coronavirus beyond China’s borders sparked fears of a repeat of something similar to the 2002-2003 SARS outbreak, which resulted in lower demand for transportation fuels throughout Asia, especially jet fuel.”

More:Oil and gas generated $3.1 billion in state revenue last year

Concerns about the virus even outweighed the support offered to the U.S. oil industry by deeper supply cuts agreed to by the Organization of Petroleum Exporting Countries (OPEC), and a supply disruption in Libya that took about 800,000 barrels per day off the market.

“Rallies will have a difficult time extending beyond the 200-day average of $57.65,” read the report. “When prices broke down through that key average last week, the declines accelerated.”

More oil and gas news:

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