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Sunoco Plans Permian-to-Gulf Coast Crude Pipeline

Sunoco Logistics Partners LP plans to hold an open season soon for a new crude oil pipeline project that would carry production from the Permian Basin in West Texas to Gulf Coast markets.

Phase I of the Permian Express project would have capacity of 150,000 b/d, which could be expanded to at least 350,000 b/d. For Permian Express Phase I, Sunoco Logistics would offer 150,000 b/d of service from Wichita Falls, TX, to the Nederland/Beaumont, TX, markets. The company would reverse its Wortham-to-Wichita Falls, TX, pipeline to create continuous pipeline service from Wichita Falls to Nederland including utilizing excess capacity on the southern leg of the West Texas Gulf pipeline system.

"Permian Express Phase I offers customers speed to market as it will be operational within six to nine months with an initial capacity of 90,000 b/d," the company said. Full capacity of 150,000 b/d would be expected within 12 to 18 months. Commitment terms of three, five or seven years will be available to prospective customers during the open season for Phase I, which is expected to launch in the coming days.

"With the use of pipe already in the ground, Permian Express Phase I offers West Texas producers and Gulf Coast refiners a fast and cost-efficient solution with tremendous operational flexibility," said Sunoco Logistics CEO Michael J. Hennigan.

Crude oil production in the Permian is expected to grow substantially, and rig activity is projected to increase as much as 50% to more than 700 in the next few years, which could be the biggest rig count increase of any U.S. oil/gas basin, according to Cameron Horwitz, U.S. Capital Advisor's director of E&P research and author of "Permian Basin: Renaissance in the Desert." Crude oil production should increase by 750,000 b/d to 1.8 million b/d between now and 2018, Horwitz said (see Shale Daily, June 12).

A second phase could deliver more West Texas crude to the Gulf Coast and farther east to refining centers in Louisiana using a combination of new and existing pipelines, Sunoco Logistics said. For Permian Express Phase II the company could twin a 300-mile pipeline, parallel to the existing West Texas Gulf pipeline, from Colorado City, TX, to Wortham where it could connect to the existing excess capacity of the southern leg of the West Texas Gulf pipeline system. Permian Express Phase II could have initial takeaway capacity of 200,000 b/d and be operational in the second half of 2014, the company said.

Permian Express is separate from, but complements, the company's previously announced plans to expand crude oil outflow on the West Texas Gulf Pipeline by at least 100,000 b/d. In total, Sunoco Logistics has currently announced projects that could increase crude oil takeaway capacity from West Texas by at least 450,000 b/d.

"Our latest crude project demonstrates once again that our assets are attractively positioned to deliver Permian Basin crude oil to markets sought by producers and refiners," Hennigan said. "Permian Express is consistent with our strategy of growing ratable, fee-based cash flow."

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