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New Pipelines Needed to Meet Surge in Permian Crude Demand

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A growing supply of crude from the Permian means the basin will need extra crude takeaway capacity of up to 500,000 BOPD by the end of the next decade, according to new research from Wood Mackenzie.

A moderate overbuild of pipeline capacity is expected in the early 2020s as the current wave of pipeline investments are completed, with midstream operators set to add approximately 4 million B/D of new US Gulf Coast-bound capacity by the end of 2022. This wave of investment will include seven proposals for new Permian pipelines, with four ultimately reaching final investment decision (FID). More than 2 million B/D of this new capacity will head to the Corpus Christi market for export.

Wood Mackenzie said the rapid addition of pipeline capacity will result in 2–3 years of overbuild before normal long-haul capacity supply and demand conditions re-emerge. As production growth expands well into the 2030s, US Gulf Coast-bound pipeline capacity will tighten. By the mid-2030s, Permian-to-Gulf Coast pipeline utilization will surpass 92% in the absence of further investment, necessitating pipeline expansions or greenfield capacity.

“We are in the midst of one of the largest crude infrastructure investment booms in US history, with much of the investment focused on the Permian Basin,” John Coleman, principal analyst of North America crude markets, said. “As massive as this current investment wave is, we don’t think the story is yet finished. Additional capacity adds will be needed again by the end of the next decade. The next chapter in this story will be focused on ensuring sufficient export terminal capacity in coastal markets.”

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