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Summit, XTO Team on Expandable Natural Gas Gathering System for New Mexico Permian

ExxonMobil Corp.’s XTO Energy Inc. and Summit Midstream Partners LP are teaming up to develop, own and operate an associated natural gas gathering and processing system to serve Permian Basin operators in New Mexico.

As proposed, the system would service the northern Delaware sub-basin in Eddy and Lea counties.

The greenfield development project “represents a significant step for Summit,” said CEO Steve Newby.

“This initial system is expected to provide Summit with a platform for significant organic expansion across crude oil, natural gas and produced water gathering and/or processing services for years to come.”

In the first phase of the project, Summit would construct a gathering and processing system with high and low pressure gathering and discharge pipelines, two compressor stations and a cryogenic processing plant with 60 MMcf/d of processing capacity. Cost is estimated at around $110 million.

The processing complex could be expanded to more than 600 MMcf/d of processing capacity as warranted, to meet customer needs.  

The next task is to execute commercial agreements “with other producers in the area,” Newby said.

The initial phase of the project should be operational by next June.

During the annual investor day meeting in March, ExxonMobil CEO Darren Woods said more capital expenditures would be directed to U.S. unconventionals, with the Permian leading the way in the U.S. onshore. ExxonMobil controls more than 1.8 million net acres across the Permian and earlier this year the leasehold was producing more than 140,000 boe/d net.

Since 2014, the supermajor has signed seven Permian-related deals, including one reached in January to capture more than 227,000 net acres in the Delaware sub-basin.

Most of the Delaware wells are to have lateral sections running 10,000-12,500 feet, Wood said.  Since 2014, the company has drilled 179 horizontal wells targeting the Wolfcamp and Spraberry formations of the West Texas/southern New Mexico play. Total unit development cost have been reduced 72% in the last two years to less than $8.00/boe/bbl, while cash field expenses have fallen almost by half to about $5.00/bbl.

Gas processing in the Permian is escalating in New Mexico. In May Lucid Energy Group started up a 200 MMcf/d cryogenic processing expansion at its Red Hills complex in Lea County. It said then it remained on schedule to bring another new plant online in the state early next year to serve more activity.

WPX Energy Inc. and Howard Energy Partners also joined forces in June to develop gas and crude oil gathering and processing infrastructure in the Stateline area of the Delaware sub-basin in West Texas.

The Permian project isn’t the first to team Summit and XTO. The partners in late 2014 teamed for a gas gathering system in southeastern Ohio’s Utica Shale. The $400 million system, with initial capacity of 500 MMcf/d, is to be expanded over several years to transport XTO gas from Belmont and Monroe counties. XTO, as the anchor shipper, initially dedicated 29,000 acres under a long-term agreement.

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