Permian Producers to Witness EPIC Solution for Bottlenecks

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Infrastructure bottlenecks in the Permian Basin, which stemmed from takeaway capacity constraints, is suffocating producers in the region for a long time now. Rising upstream activities in the region have outrun transportation capacity, which forced producers to sell their products at a discounted rate, trimming their profit levels. The extent of discount at the beginning of the year was $3.40 per barrel, which grew to $15.60 in the recent times.

To ease the situation and support future production from the region, several midstream companies have announced new pipeline projects, which are not coming online anytime soon. While some of the projects are scheduled to commence in late-2019, others are slated to start off in 2020. In order to profit from the uncertainty as well as provide relief to the producers, EPIC Midstream Holdings LP is bringing about an interim easement.


Privately owned EPIC Midstream is planning on transforming its 730-mile natural gas liquids (NGL) pipeline into a crude oil shipping one. This will ease some of the pressure from the producers in the region. The 24-inch pipeline is expected to come online by the third quarter of 2019, which will carry 400,000 barrels of oil per day (BOPD). Through this pipeline, producers like Noble Energy, Inc. NBL , Apache Corporation APA and Diamondback Energy, Inc. FANG can reach the refineries in Corpus Christi.

EPIC is also building a crude oil pipeline, which is expected to commence in early-2020 and carry 600,000 BOPD. Its capacity can be further increased to 900,000 BOPD. The converted pipeline will be transformed back to an NGL carrying one, once the crude oil pipeline comes online.

Other Projects in the Pipeline

Among many other projects in the pipeline, multi-billion dollar Permian Gulf Coast Pipeline system of Energy Transfer Partners, L.P. ETP and Magellan Midstream Partners, L.P. MMP has caught many eyes. The pipeline, expected to come online in mid-2020, will ship oil to the terminals in Houston and Beaumont.

Plains All American Pipeline, L.P. PAA , which already has an important pipeline in the region, is building another one named Cactus II, estimated to start crude transportation in late-2019.

A unit of Phillips 66 is building a $2-billion Gray Oak Pipeline system, with an initial capacity of 800,000 BOPD. By the end of 2019, it will be ready to bring crude to Houston and Corpus Christi.

With the commencement of these projects, discount rates are expected to vanish with time, which will bring great relief to the producers. Moreover, EPIC's move to deliver the pipeline before most of its peers will help it to gain significant profit as the producers will receive interim respite.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: MMP , PAA , APA , NBL , FANG

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