For well over a year, the dominant conversation in the Permian Basin has been about how to move its surging crude and natural gas production to market.
The good news is that relief is on the way as the midstream sector has launched billions in pipeline construction and expansion projects, which will be coming online later this year and early next year.
Robert Phillips, chairman, president and chief executive officer of Crestwood Equity Partners LP, opened the Hart Energy Midstream Texas conference Thursday by saying that the investment in projects was the most he’d seen in his more than 40-year career.
Speaking at the Horseshoe, he said midstream investment will be integral to supporting long-term development of the Permian Basin’s oil and natural gas production. But key to the success of those projects is what he called transparency and ESG – environment, social and government.
It begins with midstream companies giving back to their communities by donating to needs such as education, roads and other services and supporting environmental initiatives and social causes such as diversity, he said. He advised midstream companies get involved in and support such initiatives from industry associations like the Permian Basin Petroleum Association and the Permian Strategic Partnership, the New Mexico Oil and Gas Association and the GPA Midstream Association.
“They all have initiatives to help the industry recognize the challenges we face in such a fast buildup,” Phillips told the Reporter-Telegram following his presentation.
He said area companies are doing a great job of recognizing the challenges.
“I’m optimistic we’ll get it right in the Permian Basin. I know senior leadership is aware that, for us to win the hearts and minds of the public and of regulators, we have to operate with more transparency than ever before. I’m seeing significant changes in the way the industry operates around environmental and social issues, like diversity. We know we need future generations to operate the industry,” he said.
Those efforts are important, because future midstream projects will be needed, he told his audience.
While more than 2 million barrels of new crude oil takeaway capacity and 4.6 billion cubic feet of additional natural gas takeaway capacity is expected to be online by early 2020, Phillips said bottlenecks can be expected by the mid-2020s as Permian production continues to surge.
“The Permian Basin is the global energy leader,” he said, pointing to forecasts that the Permian Basin will be producing 55 percent of total U.S. production by 2035 and be producing more than 6 million barrels of oil per day by 2030.
Expectations are the new takeaway capacity will be well in excess of production, but Phillips called that a near-term story in the face of continued Permian growth.
Meanwhile, the additional takeaway capacity will offer price relief to producers who have seen bottlenecks keep West Texas Intermediate prices low compared to Cushing and the Gulf Coast. The pain has been even greater for natural gas producers, who have seen natural gas prices at the Waha hub hit record lows, even turning negative, as record high production was paired with unplanned maintenance on key pipelines, Phillips said.
That relief “can’t come soon enough for the Permian Basin,” he said.
Photo: By Nati Harnik As posted on MRT
