By Mitch Borden
The Permian Basin is producing about 4 million barrels of oil a day. The most to ever come out of the region. For a long time though, West Texas hasn’t had enough pipeline infrastructure to carry that oil east to the Gulf Coast’s ports and refineries. As new ones are being built, analysts predict that’s about to change.
Four major oil pipeline projects are set to connect West Texas to the rest of the market in the next two years. John Coleman is with research firm Woods Mackenzie. He explained these new pipelines will lead to an excess of open space.
“Within the next two years from now, you’re going to have nearly 3.5 million barrels a day of capacity come online in that time. For reference, you’re literally doubling the [Permian Basin’s] pipeline capacity in two years.”
Coleman said once that happens, it will take some time before producers can drill enough oil to fill all of the pipelines, which will give the region’s price per barrel a temporary boost. Three of the four pipelines coming online in the next few years should be operating around the beginning of 2020.
Even with this added infrastructure, the oil industry may still have to deal with some bottlenecks. The three pipelines that are about to be completed in the next year are all headed to Corpus Christi, where the oil will mostly be shipped overseas. Additional storage and shipping facilities are still being developed there though. So, according to Coleman:
“You could see a fair amount of congestion getting that crude on the water because pipelines are turning on before a lot of that export infrastructure is going to be in place.”
Coleman said these downstream issues will eventually be dealt with and the new pipelines should allow growth to continue in the Permian without the fear of backups hanging over the region — at least for the near future.