Playbooks

Permian Basin 2017

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PERMIAN BASIN: MIDSTREAM UGcenter.com | November 2017 | 63 Texas, online in January 2018, a full month ahead of schedule. Comanche I, at 60 MMcf/d was brought into service at the end of 2016, and Comanche III, a twin of II, is now due to be started before the end of 2018. That will also be early. Those are just two of the many new and expanded processing projects that are underway or planned. In a report released jointly with Hart Energy in January, Drillinginfo estimated that "cur- rent cryogenic gross gas processing capacity in the Permian Basin is 9.7 Bcf/d of which only 7.2 Bcf/d consist of larger, more efficient cryogenic plants with capacity larger than 100,000 bbl/d. There will definitely be a need for additional cryogenic pro- cessing infrastructure in the Permian starting in early 2020. The wet gas being produced from the Delaware and Midland basins require larger, more efficient processing plants. These fields will require additional new, efficient cryogenic capacity starting in mid-2019." On the crude side Drillinginfo stated that "cur- rent crude local refining and takeaway capacity from the Permian is 2.6 MMbbl/d. Production will outpace existing takeaway capacity by the end of 2017. There is currently one pipeline planned to come online in mid-2018, [Enterprise Products'] Midland-to-Sealy, that will add an initial 300,000 bbl/d of new capacity. There does exist the poten - tial to add an additional 350,000 bbl/d of capac- ity by adding pump stations to existing pipelines. Additionally, the new Midland-to-Sealy pipeline could be expanded to 450,000 bbl/d in a similar fashion." Enterprise declined to comment on the status of the project. At the far end of the midstream, there are even plans for a refinery in the heart of the Permian. Phase 1 will be modest, but long-term plans have it growing to 100,000 bbl/d, which would be a mean- ingful step in moving the needle on crude takeaway (see sidebar p. 70). Big and rich Up and down the line midstream operators know that wells are coming on bigger and richer than had been anticipated. "As we go into execution mode on our plans, speed is the critical consideration for us and for our producer counterparties," said Mike Latchem, president and CEO of Lucid. "Red Hills II was a little ahead of schedule, and we believe Roadrunner will be a month ahead. That is all related to the success of the wells in northern Delaware, including the Wolfcamp, the Bone Springs and the Avalon. They are coming on so much stronger than the producers anticipated. That is a great problem to have." Latchem told Midstream Business that Lucid has already purchased its third 200-MMcf/d plant as it mulls where to place it. "Originally the plan was to put it in Lea County and make it Red Hills III, but it may end up in Eddy County as Roadrunner II. Oil is the target in those areas but the gas is prolific," he said. Lucid is a portfolio company of EnCap Flatrock Midstream, which manages investment commitments of nearly $6 billion from a broad group of institutional investors. "This kind of growth is exactly why we acquired Agave," Latchem said. "Our business case was built around certain volumes, and since the closing some of the producers have rotated to bigger names. Now we are dealing with larger independents or majors, and we are in a position to be counterpar- ties to larger and stronger producers. Our response to their acceleration on the supply side has been to accelerate our capex and our construction and installation schedules." In addition to gas processing, Lucid has devel- oped a system to move NGL and residue gas out of the Permian by collaborating with a large long-haul carrier. "We did the first phase ourselves, building out to the transmission line and making a 10-year commitment for volume. This is existing and we are active," he said. It is all part and parcel of a theme of moving quickly to meet emerging needs. Latchem explained that, "the thesis for the Agave acquisition was that while there was sufficient processing capacity on a gross basis across the Permian, there was insuffi - cient capacity in some local areas, especially south- ern New Mexico. We also saw Texas processors starting to extend up into New Mexico. Part of our quick-execution strategy was to serve the suppliers we were inheriting from Agave, and also to create new capacity as soon as possible." There was some processing capacity in the southern Delaware, but not of sufficient scale

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