Permian Poised for Next Pipeline Wave

Thanks to growing production from the Permian Basin, another wave of new crude oil takeaway capacity will be needed by the end of the next decade, according to natural resources consultancy Wood Mackenzie.

“As production growth expands well into the 2030s, U.S. Gulf Coast-bound pipeline capacity will tighten,” John Coleman, Wood Mackenzie principal analyst for North American crude markets, said in a written statement emailed Monday to Rigzone. “By the mid-2030s, Permian-to-Gulf Coast pipeline utilization will surpass 92 percent in the absence of further investment, necessitating pipeline expansions or greenfield capacity.”

According to Wood Mackenzie, a “moderate overbuild of pipeline capacity” should occur early next decade as the current wave of pipeline projects conclude. By the end of 2022, midstream operators should add approximately 4 million barrels per day (bpd) of new capacity bound for the U.S. Gulf Coast, the firm stated. It assumes seven proposals for new Permian pipelines, with four reaching the final investment decision (FID) stage and 2 million bpd of the capacity flowing into Corpus Christi for export.

Wood Mackenzie contends the new capacity should translate into “two to three years of overbuild.” Subsequently, it expects the need for additional pipeline infrastructure as “normal long-haul capacity supply and demand conditions” resurface.

“We are in the midst of one of the largest crude infrastructure investment booms in U.S. history, with much of the investment focused on the Permian basin,” stated Coleman. “As massive as this current investment wave is, we don’t think the story is yet finished.”

Wood Mackenzie’s supply forecast anticipates another call for up to 500,000 bpd of Permian-to-Gulf Coast crude capacity, with FID for the new capacity likely during the middle to latter half of the next decade.

“The next chapter in this story will be focused on ensuring sufficient export terminal capacity in coastal markets,” concluded Coleman.