Details You Should Know About the Permian Basin Pipeline in West Texas

Details You Should Know About the Permian Basin Pipeline in West Texas

  • Oil production in the Permian Basin has surged from less than 1 million barrels per day in 2009 to over 3.5 million barrels per day by the Fall of 2018.
  • Production in the Permian basin, the biggest oil-producing region in the United States, has outstripped its pipeline transport, sending regional crude prices last month to the lowest levels in six years.
  • The 600-mile Permian Gulf Coast pipeline is expected to begin operation in mid-2020.

Magellan and co-investors Energy Transfer Partners LP, MPLX LP, and Delek US Holdings, Inc., will construct the pipeline. They are now projecting to spend about $2 billion to construct a proposed crude oil pipeline which would run from the Permian Basin in West Texas to the U.S. Gulf Coast.

“We have binding commitments that give us very attractive economics. But what we don’t know is the full demand,” which would dictate the project’s final cost, Michael Mears, Magellan’s chief executive, said at the Barclays energy conference in New York.

The project cost for the Permian Gulf Coast pipeline will be clear after shippers commit to volume capacity during the so-called open season, Mears said. The bidding process for additional shipper commitments will be launched later this week.

Right now, a 30-inch diameter pipeline is expected to carry Permian Basin oil supply to the Texas Coast, however the pipe diameter may increase to expand capacity. Once in service, the PGC is expected to push total Permian Basin takeaway and local refining capacity to 6.75 million b/d by mid-2020 in-service.

To keep up on pipeline related news, check the Submar blog regularly, where we’ll keep you up to date.