By Arathy Somasekhar
HOUSTON (Reuters) – Top executives of two U.S. energy pipeline operators on Thursday ruled out building new crude oil lines to move volumes from the Permian shale field in West Texas, citing tepid volume growth and difficulties in building new lines.
A wave of consolidation in the US’s top shale field has concentrated production in the hands of companies vowing to limit production to keep prices from crashing from overproduction. Pipeline companies have also embraced acquisitions instead of new construction.
Jim Teague, co-CEO of Enterprise Products Partners, said at an energy conference in Houston that his company is not considering a new oil pipeline from West Texas. The CEO of rival operator Plains All American Pipeline said at the same event that companies are more likely to optimize existing lines than build new ones.
Enbridge will add up to 120,000 barrels per day (bpd) to its Gray Oak oil pipeline by 2026, an example of expanding capacity on an existing pipeline. Enterprise has said it could convert a natural gas liquids pipeline to transport crude oil.
Shale pipeline operator EPIC Consolidated Operations is considering expanding a line between Permian and South Texas by about 300,000 barrels per day.
The expansion is a “when, not an if,” said EPIC CEO Brian Freed.
Price no longer incentivizes drillers
Executives said Permian shale gas producers are unlikely to return to the era of rapid growth that prompted the construction of new oil pipelines over the past decade.
Drilling companies remain disciplined in their spending on new volumes and do not plan to drill and grow production even if prices rise from current levels, Chiang added.
“A range of roughly $60 to $90 (per barrel) doesn’t change their plans too much,” he said.
Permian Basin production could rise by about 300,000 barrels per day in coming years, he said, largely in line with the government’s latest estimate.
“Most Permian producers are taking a more moderate pace because of the consolidation,” EPIC’s Freed said.
DEEPWATER EXPORT PROJECTS LAG
Enterprise’ Teague also said his company continues to advance its proposed deepwater oil export project, Sea Port Oil Terminal (SPOT), but that “nobody wants to be (the) first” customer to sign up.
Years of regulatory delays, a loss of commercial backers and slowing growth in U.S. shale oil production mean SPOT and three rival offshore oil export projects are struggling.
A change in crude flows as many Western countries banned imports of Russian crude following the invasion of Ukraine, sending Russian oil flowing to Asia, has also undermined prospects for U.S. deepwater export projects that can load supertanker directly.
“Things have changed, but my gut feeling is that we can get SPOT across the finish line,” Teague said while speaking at an RBN Energy conference in Houston.
However, Plain’s Chiang said that “the jury is out on SPOT”, while on paper it makes a lot of sense, existing export contracts and systems could limit customer availability.
(Reporting by Arathy Somasekhar, Editing by Franklin Paul, David Evans and David Gregorio)
