Contact Us

Many Pipelines Becoming Active Soon

Posted on August 10, 2019

Plains All Americans’ Cactus II oil pipeline will be beginning its line fill this week, one of several pipelines expected to become operational by the end of 2019.

The line fill, meaning the process of filling a pipeline with oil, is the final step before commercial deliveries begin, pumping 670,000 barrels a day from the Permian Basin to Corpus Christi. Reuters first reported the line fill from a source with knowledge of the matter, Plains All American did not respond to multiple requests for comment.

Plains All American states on its website the pipeline is expected to begin partial service in the fourth quarter of 2019, and full service by the second quarter of 2020. Cactus II is just one of several pipelines expected to help with the bottlenecked transportation of oil and gas out of the Permian Basin.

Odessa oilman and Latigo Petroleum President Kirk Edwards said pipelines have been an issue all oil and gas companies in the Permian Basin have been dealing with at the same time, and said the increase in pipelines will dramatically affect operators in the area in several different ways.

 “First of all, it helps with the flaring issues that we’re having and the negative gas prices because the operators just simply can’t get rid of their gas and have to flare it off,” Edwards said. “It’s both an economic and environmental benefit to operators out here in the Permian.”

Gas is priced in several different hubs, Edwards explained. The price usually seen in Wall Street is called Henry Hub, and is in the Houston area, and in West Texas, gas companies use the Waha Index. Even though Henry Hub may list the price of gas at $2.30 per thousand cubic feet, the price on the Waha Index can be much different.

“Here in West Texas it can actually be zero dollars for their gas, or these producers are paying these pipelines to take gas away,” Edwards said. “So anything the producer can get above zero out here right now is gonna be good for them.”

Flaring of natural gas happens for many reasons, one of which is because it is difficult to store right now due to the lack of pipelines. Edwards said there are estimates of between 500 and 600 million cubic feet of natural gas being flared off in the Permian Basin.

“So any of that gas that can be put into the pipelines and actually people get dollars for is huge uplift for the operators out here in West Texas,” he said.

The one natural gas pipeline scheduled to become operational this year is the Gulf Coast Express, which will pump 2 billion cubic feet of natural gas a day from the Permian Basin to the Agua Dulce area near the gulf coast. Five other gas pipeline projects are under construction, expected to pump a similar amount, and will become active throughout 2020, 2021 and 2023.

In addition to the Cactus II pipeline, Phillips 66’s Gray Oak pipeline is expected to be operational by the fourth quarter of 2019, an 850-mile oil pipeline stretching from the Permian Basin to Corpus Christi, and has the capacity to produce about 900,000 barrels a day.

There are some environmental concerns that come with oil pipelines as well, like spills. A recent case involved the Keystone Pipeline, which spilled about 1,800 gallons of oil in Missouri in February.

Despite this, Edwards said anything shipped via pipeline is still safer by a factor of four to five decimal places than it being shipped by train or truck.

The Sierra Club’s Lone Star Chapter has protested certain pipelines in the past. Lone Star Chapter Interim Director Cyrus Reed said they tend to focus on pipelines intended to lead to products being exported.

“We as an organization are very concerned about climate change and ultimately opening up all of this drilling for both gas and oil, not to meet needs in TX necessarily, but then to be exported to other places just increases the carbon footprint.”

 https://www.oaoa.com/inthepipeline/article_9d3463f2-9f61-11e9-a81e-e38f0545730c.html