The Biggest U.S. Oil Patch Is Near Its Limit - Pipelines will reach limit within 3 to 4 months

[IsailedawayfromFR]

The biggest U.S. shale region will have to shut wells within four months because there aren’t enough pipelines to get the oil to customers, the head of one of the industry’s largest producers said.

The worsening bottleneck in the Permian region that straddles west Texas and New Mexico offers an unexpected fillip to OPEC and other oil producers outside the U.S., who’ve seen rampant production from America’s shale producers grab market share.

"We will reach capacity in the next 3 to 4 months," Scott Sheffield, the chairman of Pioneer Natural Resources Co. said in an interview at an OPEC conference in Vienna. "Some companies will have to shut in production, some companies will move rigs away, and some companies will be able to continue growing because they have firm transportation."

His comments are the strongest indication yet that the growth in the red-hot shale region is about to slow down soon due to a lack of pipeline capacity. The problem has grown so bad that oil companies have been forced to load crude on to trucks and drive it hundreds of miles to pipelines in other parts of the state.

https://www.bloomberg.com/news/articles/2018-06-20/shale-giant-says-permian-oil-faces-shut-ins-on-pipeline-shortage

Unbelievable short term growth

[Smokin Joe]

We had something similar happen with the Bakken/Three Forks boom up here. Keystone was to increase takeaway capacity some 100K barrels, but that got stymied, and by then the rail terminals were going up fast.

After a few rail accidents (trainwrecks), and some regulation of vapor pressure limits in rail cars at the State level, that kept going but the DAPL was to take 500K BOPD out and sure enough, Obama and the Standing Rock Sioux (and the usual ecowhacko and Hollywierd types) held that up, on the brink of completion. Thankfully (and one act of Trump's I definitely agree with) Trump called for an end to the reevaluation of the reevaluation of the reevaluation of the permits by the various agencies, and the pipeline was completed, running some 90 ft. below the bed of the Missouri River. That takeaway capacity has made a significant difference, and the rail cars are still being loaded and shipped out, too.

How is that part of Texas for rail?

[IsailedawayfromFR]

We had something similar happen with the Bakken/Three Forks boom up here. Keystone was to increase takeaway capacity some 100K barrels, but that got stymied, and by then the rail terminals were going up fast.

After a few rail accidents (trainwrecks), and some regulation of vapor pressure limits in rail cars at the State level, that kept going but the DAPL was to take 500K BOPD out and sure enough, Obama and the Standing Rock Sioux (and the usual ecowhacko and Hollywierd types) held that up, on the brink of completion. Thankfully (and one act of Trump's I definitely agree with) Trump called for an end to the reevaluation of the reevaluation of the reevaluation of the permits by the various agencies, and the pipeline was completed, running some 90 ft. below the bed of the Missouri River. That takeaway capacity has made a significant difference, and the rail cars are still being loaded and shipped out, too.

How is that part of Texas for rail?

I would assume it already happening.  Can you verify @thackney ?

[Sanguine]

bookmark

[Joe Wooten]

There are two rail lines in the Permian basin that runs east-west from Ft. Worth to Abilene-Big Spring-Stanton-Midland-Odessa and another that runs through the southern PB from Alpine through Rankin, Big Lake, and San Angelo ending at another line in Coleman ( I think).

http://ftp.dot.state.tx.us/pub/txdot-info/tpp/maps/2016-railroad.pdf

[Smokin Joe]

https://ndpipelines.files.wordpress.com/2012/05/nd-rail-facilities-july-2017.pdf

this is a BNSF presentation, but gives you an idea of the sort of infrastructure that can be achieved in a relatively short time. Rail costs more for shipping, but has greater versatility destination wise. Pipelines are the way to go, but augmenting that takeaway capability in the long run, rail allows more flexibility.
https://www.dmr.nd.gov/pipeline/assets/Video/03022011/NDPA%20Rail%20Webinar%20Slides%202-28-2011.pdf

[thackney]

https://ndpipelines.files.wordpress.com/2012/05/nd-rail-facilities-july-2017.pdf

this is a BNSF presentation, but gives you an idea of the sort of infrastructure that can be achieved in a relatively short time. Rail costs more for shipping, but has greater versatility destination wise. Pipelines are the way to go, but augmenting that takeaway capability in the long run, rail allows more flexibility.
https://www.dmr.nd.gov/pipeline/assets/Video/03022011/NDPA%20Rail%20Webinar%20Slides%202-28-2011.pdf

In the long run, most oil-on-rail projects won't be price competitive for a long run of oil production.

The Permian Oil And Natural Gas "Growth Wall" Is Short-Sighted
https://www.forbes.com/sites/judeclemente/2018/04/19/the-permian-basin-needs-more-oil-and-natural-gas-pipelines/#7bfab4daaa5a

...The pipeline problem in the Permian has allowed trains to compensate. Once production exceeds capacity, 400,000-500,000 b/d of crude will have to move out of the Permian by rail and potentially truck over the next few years, or until more pipelines can start commercial service. At $6-8 per barrel, shipping crude by rail from the Permian to the Gulf Coast can be double or triple the cost of moving it by pipeline, with trucking double or triple the price of rail. Truck and rail, however, do offer a key benefit by adding destination flexibility and less exposure to more rigid long-term contracts. But the anti-pipeline movement should know that, not just cheaper, pipelines are 4.5 times safer than rail and more of them will help reduce gas flaring....

- - - - - - - - - - - - - - - -

@IsailedawayfromFR

Operators Race to Build Pipelines as Permian Nears Takeaway Capacity
https://pgjonline.com/magazine/2018/march-2018-vol-245-no-3/features/operators-race-to-build-pipelines-as-permian-nears-takeaway-capacity
March 2018

...Increasing constraints and projected output have triggered a race to build or expand pipelines to deliver Permian crude to Gulf Coast refineries and export terminals. At least 2.4 MMbpd of potential new Permian oil pipeline capacity has been proposed by a half-dozen operators, and those who have progressed to open season have reported strong customer interest.

“The extent to which this pipeline congestion materializes will depend on how much production increases, and anybody who makes those production forecasts is making guesses based on drilling rates and the expected productivity of new wells. But it’s a very strong signal that we’ve got this sudden batch of new pipelines coming to market,” said Sandy Fielden, director of Oil and Products Research for Morningstar Commodities Research.

“The only reason these midstream companies are doing that is because of an expectation that there’s going to be a significant increase in production,” Fielden said. “Exactly when that congestion occurs is obviously the big question, but our expectation is that demand will surpass capacity around the second quarter of this year.”...

And just in time for the new steel tariffs...

[IsailedawayfromFR]

In the long run, most oil-on-rail projects won't be price competitive for a long run of oil production.

The Permian Oil And Natural Gas "Growth Wall" Is Short-Sighted
https://www.forbes.com/sites/judeclemente/2018/04/19/the-permian-basin-needs-more-oil-and-natural-gas-pipelines/#7bfab4daaa5a

...The pipeline problem in the Permian has allowed trains to compensate. Once production exceeds capacity, 400,000-500,000 b/d of crude will have to move out of the Permian by rail and potentially truck over the next few years, or until more pipelines can start commercial service. At $6-8 per barrel, shipping crude by rail from the Permian to the Gulf Coast can be double or triple the cost of moving it by pipeline, with trucking double or triple the price of rail. Truck and rail, however, do offer a key benefit by adding destination flexibility and less exposure to more rigid long-term contracts. But the anti-pipeline movement should know that, not just cheaper, pipelines are 4.5 times safer than rail and more of them will help reduce gas flaring....

- - - - - - - - - - - - - - - -

@IsailedawayfromFR

Operators Race to Build Pipelines as Permian Nears Takeaway Capacity
https://pgjonline.com/magazine/2018/march-2018-vol-245-no-3/features/operators-race-to-build-pipelines-as-permian-nears-takeaway-capacity
March 2018

...Increasing constraints and projected output have triggered a race to build or expand pipelines to deliver Permian crude to Gulf Coast refineries and export terminals. At least 2.4 MMbpd of potential new Permian oil pipeline capacity has been proposed by a half-dozen operators, and those who have progressed to open season have reported strong customer interest.

“The extent to which this pipeline congestion materializes will depend on how much production increases, and anybody who makes those production forecasts is making guesses based on drilling rates and the expected productivity of new wells. But it’s a very strong signal that we’ve got this sudden batch of new pipelines coming to market,” said Sandy Fielden, director of Oil and Products Research for Morningstar Commodities Research.

“The only reason these midstream companies are doing that is because of an expectation that there’s going to be a significant increase in production,” Fielden said. “Exactly when that congestion occurs is obviously the big question, but our expectation is that demand will surpass capacity around the second quarter of this year.”...

And just in time for the new steel tariffs...

thanks.

I will add the pipeline problems WILL be solved, and quickly so any bottlenecks will be short-lived, at least for the oil produced on the Texas side.

That is the beauty and attractiveness of industry working in Texas: no crossing of state lines, and a bureaucracy that is focused on what is good for the economy of the state.

New Mexico is another story.

[thackney]

thanks.

I will add the pipeline problems WILL be solved, and quickly so any bottlenecks will be short-lived, at least for the oil produced on the Texas side.

That is the beauty and attractiveness of industry working in Texas: no crossing of state lines, and a bureaucracy that is focused on what is good for the economy of the state.

New Mexico is another story.

Some improvement even in the New Mexico corner.

Texas oil cos. partner up on crude oil pipeline to increase production in the Permian Basin
https://www.bizjournals.com/albuquerque/news/2018/05/11/texas-oil-cos-partner-up-on-crude-oil-pipeline-to.html
May 11, 2018

...EPIC Midstream Holdings LP has secured a partnership with Apache Corp. and Noble Energy as it constructs its 730-mile crude oil pipeline that will stretch from Eddy County in southeast New Mexico to Corpus Christi, Texas, and will run side-by-side with EPIC's natural gas liquids pipeline, which has a 650-mile range.

After beginning construction last November, the crude oil pipeline is scheduled to be in service by the second half of 2019, according to a release....

- - - - - - - -

Just before I hit post, I hunted for a map and found this is only in Texas and not reaching New Mexico:



https://epicpipelinelp.com/projects/crude-pipeline/

The EPIC Crude Oil Pipeline will extend from Orla,Texas to the Port of Corpus Christi, Texas. The project includes terminals in Orla, Pecos, Saragosa, Crane, Wink, Midland, Helena and Gardendale, with Port of Corpus Christi connectivity and export access. It will service the Delaware, Midland and Eagle Ford Basins. Right of way is 100 percent secured for the first two phases of the system, and construction is expected to commence in the fourth quarter of 2018. The crude system is expected to be in service in the second half of 2019.

[Smokin Joe]

One thing about rail is that it also opens up smaller markets, smaller refineries, to direct delivery. Texas has the ideal situation, with refineries in the same state as the production (we have some of that again, now, but nowhere near the capacity of the refineries there. In a nutshell, rail goes places a pipeline doesn't, but expect it to cost about $5/bbl more to get it there.