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Permian’s San Andres Draws More NatGas, Crude Oil Infrastructure Expansions

As interest in the San Andres formation in the Permian Basin is growing, so too is infrastructure, with Stakeholder Midstream LLC announcing Tuesday it plans to build a natural gas gathering system that would run from West Texas into southeastern New Mexico. It also plans to expand a crude gathering system in the play.

The new assets are supported by long-term contracts and dedications of more than 100,000 acres from producers, the San Antonio-based operator said.

“The San Andres has a long history as one of the most prolific formations in the country for oil and gas producers pursuing vertical development,” said Stakeholder Co-CEO Rob Liddell. “Today we are seeing very favorable economics coupled with strong production results as producers apply horizontal drilling techniques across the play.

“With more than 130 horizontal wells drilled over the past 12 months, we’ve moved rapidly to work with our customer base to design and build infrastructure that effectively manages the complex set of challenges presented by the San Andres sour gas stream.”
The company has had a “great response to our ability and commitment to meeting these challenges and are excited to announce a purpose-built system that includes state-of-the-art treaters, acid gas injection wells, a nitrogen rejection unit and a best-in-class cryogenic processing plant.”

Co-CEO Gaylon Gray said operators in the play have begun “accelerating their drilling schedules, and we share their confidence in the future of the play. We also believe there is line of sight to the development of other formations in the Northwest Shelf and Central Basin Platform.

“Although gas qualities differ across formations, many of these other formations will likely exhibit some of the same challenges the San Andres gas has presented, and we are pleased to have a facility that can meet the needs of producers regardless of the target zone.”

Only a few days ago Santa Fe Midstream LLC announced it was building a gas gathering system and a separate crude oil system in the San Andres, which is expected to ramp up by mid-2018.

Stakeholder’s gas system is to include low-pressure sour gas gathering lines across Yoakum County, TX, and into Lea County, NM. Stakeholder also would expand the existing San Andres Crude Gathering System.

To support its expanded gas gathering footprint, Stakeholder plans to build a state-of-the-art treating and processing facility in Yoakum County that would include front-end liquids handling, an amine treater and acid gas injection well, a cryogenic processing plant with the capacity to process 60 MMcf/d and a nitrogen rejection unit.

The gas system should be fully operational in 3Q2018, management said. Stakeholder is working with producers regarding expansions into New Mexico’s Roosevelt, Chaves and Eddy counties and in the Texas counties of Cochran and Gaines. Plans are to announce more gas expansions by year’s end.

Stakeholder in early May commissioned the San Andres Crude Gathering System in Yoakum County, and it now consists of 90 miles of gathering pipelines, a storage terminal and multiple downstream pipeline connections.

The crude oil expansion is to include more gathering lines, pump stations and storage capacity. Stakeholder is in the process of securing rights of way, with more gathering lines set to come into service in early 2018. The company also is working with several producers to expand the gathering system into surrounding counties.

Stakeholder, founded two years ago, is backed by private equity commitments from EnCap Flatrock Midstream, a partnership between EnCap Investments LP and Flatrock Energy Advisors.

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