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Crestwood Dives Into Delaware Basin With JV, Crude Pipeline Plans

Crestwood Equity Partners LP announced Wednesday a nonbinding open season seeking shipper support for its Delaware Takeaway (Delta) crude pipeline system, and said it is in negotiations with private equity firm First Reserve to form a joint venture (JV) to support growing producer demand for midstream infrastructure in the Permian Basin’s Delaware sub-basin.

The Delta would be a 164-mile crude and condensate pipeline header system originating at a proposed Crestwood terminal near Orla, TX, with potential downstream connections to multiple interconnects that would provide shippers access to end markets in Texas including El Paso, Midland, Cushing, Houston and Corpus Christi, Crestwood said.

As designed, the system would have the capability to batch multiple grades of crude and condensate, and initially transport more than 200,000 b/d. The project may be expanded based on results of the open season. Delta is expected to be operational in the second quarter of 2017.

Crestwood said it is in exclusive negotiations with a large producer in the Delaware to anchor a large-scale three-stream gathering system spanning portions of the Texas counties of Reeves, Loving, and Culberson that would aggregate crude and condensate volumes to the Orla terminal. The gathering system would consist of 600 miles of pipelines and span an area in excess of 400,000 acres.

The Orla Terminal is planned to initially provide 200,000 bbl of storage, truck loading and unloading facilities, blending services, multiple upstream and downstream pipeline connections, and would potentially provide condensate stabilization services for Wolfcamp Shale production from the Delaware.

The open season is through 4 p.m. CST Dec. 7. For additional information contact Russ Kovin at (832) 519-2260 and russ.kovin@crestwoodlp.com; Mindy Hagerman at (832) 519-2261 and mindy.hagerman@crestwoodlp.com;  or Brian Freed at (832) 519-2273 and brian.freed@crestwoodlp.com.

Crestwood also is negotiating with First Reserve to form a 50/50 development JV under which each would initially commit equity capital of $500 million to finance identified greenfield development and acquisition opportunities in an area of mutual interest spanning Reeves, Culberson and Loving counties. Under the terms of the JV, First Reserve would fund 100% of initial capital requirements during early-stage build-out of the systems, after which Crestwood would fund 100% of capital requirements for a period of time to achieve the 50/50 capital structure.

"The Delaware Permian Basin is the most active shale play in the U.S., and Crestwood is well positioned with current assets and future projects to build significant midstream infrastructure in the area and provide much needed midstream solutions for our producer customers," said Crestwood COO Heath Deneke. "With First Reserve's capital and strategic partnership, we are aggressively moving forward with expansion projects to support our producers' development plans largely focused on the Wolfcamp formation. The Wolfcamp formation remains substantially economic to develop and produce, even at today's lower commodity prices, and the development of midstream infrastructure remains vitally important to providing optimal market outlets for supply development."

First Reserve has experience in the Delaware through its ownership interest in RKI Exploration, whose Permian assets were recently sold to WPX Energy Inc. (see Shale DailyAug. 31July 14).

Completing the JV is subject to approvals by Crestwood's board and special committee and First Reserves investment committee.

Last November, Crestwood Midstream Partners LP and an affiliate of Brookfield Infrastructure Group bought Tres Palacios Gas Storage LLC from Crestwood Equity Partners LP for $130 million to increase storage capacity (see Daily GPINov. 24, 2014).

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