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ETP, Partners Pull Trigger on Permian Gulf Coast Oil Pipeline

A 30-inch diameter pipeline to carry Permian Basin oil supply to the Texas Coast has enough support to move forward, a quartet led by Energy Transfer Partners LP (ETP) said Tuesday.

The 600-mile Permian-Gulf Coast (PGC) pipeline is expected to be operational by mid-2020 with “multiple” origins in West Texas, including Wink, Crane and Midland.

ETP already had partnered with Magellan Midstream Partners LP (MMP) to build the system, with MPLX LP and Delek US Holdings Inc. announced as partners on Tuesday.

ETP offered few details. However, the system initially is to be designed to transport Permian oil to its Nederland terminal southeast of Houston and to MMP’s East Houston terminal. They each have access to the Houston Ship Channel.

Ultimately, the four partners may increase the pipe diameter to expand capacity, based on additional commitments received during an upcoming open season, which is expected to be launched this week.

ETP management indicated during first and second quarter conference calls this year that the PGC initially would transport up to 600,000 b/d, expandable to 1 million b/d. In addition to transporting Permian oil to Nederland and the East Houston terminals, the system could provide shipper capacity to ETP’s storage facility and pipeline header systems, as well as deliveries into Bayou Bridge, which moves oil from Nederland to Lake Charles, LA.

“While no ownership interests were disclosed, ETP commentary that they would ultimately expect to own 25% likely signals ratable interests,” said Tudor, Pickering, Holt & Co. (TPH) analysts. The project is expected to cost around $2 billion.

Once in service, the PGC is expected to push total Permian Basin “takeaway and local refining capacity to 6.75 million b/d by mid-2020 in-service, allowing multi-year runway for production growth at the expense of legacy pipeline earnings and marketing margin,” analysts said.

ETP has its fingers in a bevy of Texas projects designed to move oil from the Permian to the Gulf Coast.

ETP and Satellite Petrochemical USA Corp. earlier this year agreed to form the Orbit joint venture to construct an ethane export terminal at ETP’s Mont Belvieu natural gas liquids (NGL) facility near Houston. In April ETP launched an open season to test support to convert an existing NGL pipeline in West Texas to a diesel pipeline to move product from Hebert to a new terminal in Midland using existing pipelines, including ETP’s Lone Star 12-inch diameter line.

And in May ETP and Enterprise Product Partners LP formed 50/50 joint venture to resume service on the Old Ocean natural gas pipeline. The 24-inch diameter pipeline, which originates in Maypearl and extends south 240 miles to Sweeny, near the coast, has an initial design capacity of 160,000 MMBtu/d.

ETP and Enterprise also are expanding their jointly owned 36-inch diameter North Texas pipeline, which would provide around 160,000 MMBtu/d of additional capacity from West Texas for deliveries into Old Ocean. The North Texas pipeline expansion is expected to be completed by year’s end.

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