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Permian Basin and the Need for Increasing Takeaway Capacity

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Dec. 15 2017, Updated 7:15 a.m. ET

Midstream takeaway capacity

As we’ve already seen in this series, the Permian Basin boasts higher productivity and lower costs. The basin’s output could thus keep rising as producers keep drilling. See Part 2 of this series to read about the EIA’s (U.S. Energy Information Administration) forecasts for Permian production growth trends. As production increases, pipeline capacity could become more crucial.

The above chart shows Permian production forecasts through 2020 as midstream projects come online.

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Key projects and expansions

Several pipelines have come online to accommodate rising Permian production in recent years, including the BridgeTex pipeline, a 50-50 joint venture of Magellan Midstream Partners (MMP) and Plains All American Pipeline (PAA). Earlier this year, the pipeline expanded from a capacity of 300,000 bpd (barrels per day) to 400,000 bpd. Driven by customer demand, BridgeTex may further expand the capacity to 440,000 bpd.

Plains All American Pipeline recently announced an open season for crude oil transportation from the Permian Basin to the Corpus Christi pipeline. That could potentially add 575,000 barrels per day of Permian Basin pipeline takeaway capacity. Magellan Midstream Partners also recently announced an open season to develop a new pipeline that would transport crude oil from the Permian and Eagle Ford Basins to multiple destinations in Corpus Christi and Houston.

EPIC Pipeline Company has announced an open season to gauge interest for crude oil and condensate transportation from the Permian Basin to Corpus Christi, Texas. The EPIC Pipeline is expected to have a capacity to deliver 550,000 barrels per day. It’s expected to be operational by 2019.

In addition to higher productivity and lower costs, increasing takeaway capacity could thus cause Permian producers to find even more incentives to drill in the Permian Basin.

In the following part, we’ll look at forecasts for Permian investments in the coming years.

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